891H Country-by-country reporting

Summary

This section was introduced by the 2015 Finance Act to give effect to the OECD Base Erosion and Profit Shifting (BEPS) Project recommendations for country-by-country reporting. The section was amended by the 2016 Finance Act to allow for the transposition of Council Directive (EU) 2016/881 as regards mandatory automatic exchange of information in the field of taxation (known as DAC 4). DAC 4 aims to transpose the OECD BEPS recommendations for country-by-country reporting into EU legislation.

The section requires an Irish resident parent company of large Multinational (MNE) groups to provide annually, and for each tax jurisdiction in which they do business, a country-by-country report to the Revenue Commissioners. The requirement begins for fiscal years commencing on or after 1 January 2016.

The report is required to contain details of the MNE group’s revenue, profit before income tax and income tax paid and accrued. It also requires MNEs to report their number of employees, stated capital, retained earnings and tangible assets in each tax jurisdiction. Finally, it requires MNEs to identify each entity within the group doing business in a particular tax jurisdiction and to provide an indication of the business activities each entity engages in.

The country-by-country report is based on guidance published by the Organisation for Economic Co-operation and Development (OECD)/G20 as part of the Base Erosion and Profit Shifting (BEPS) project on 5 October 2015.¹ BEPS Action 13 recognised that improved and better-coordinated transfer pricing documentation will increase the quality of information provided to tax administrations and limit the compliance burden on businesses. The report will be filed in the ultimate parent entity’s jurisdiction and shared with other tax administrations automatically through government-to-government exchange of information.

The section enables the Revenue Commissioners to make regulations in relation to country-by-country reporting. For example, regulations can be made to give effect to the manner and form in which a country-by-country report is to be provided. The regulations can also provide for group companies other than the parent company to provide a country-by-country report or an equivalent country-by-country report in certain circumstances.

Details

Definitions

(1) “constituent entity”, “MNE group”, “qualifying competent authority agreement”, “surrogate parent entity”, “systemic failure” and “ultimate parent entity”, have the meanings given to them respectively by Article 1 of the OECD model legislation. The use of the meanings given in the OECD model legislation is designed to ensure that country-by-country reporting operates in a consistent manner across all participating jurisdictions.

“competent authority” means a competent authority for the purposes of a qualifying competent authority agreement;

‘domestic constituent entity’ means a constituent entity, that is resident for the purposes of tax in the State, but does not include —

1. an ultimate parent entity,
2. a surrogate parent entity, or
3. an EU designated entity;

‘EU designated entity’ means a constituent entity of an MNE group, not being an ultimate parent entity or surrogate parent entity, that —

1. is resident in a Member State for tax purposes, and
2. has been designated as an entity by that MNE group to provide a country-by-country report on behalf of all constituent entities of the MNE group resident for tax purposes in a Member State;

‘fiscal year’ means an annual accounting period, or any such shorter accounting period, with respect to which the ultimate parent entity of the MNE group prepares its financial statements;

“income tax” means income tax or corporation tax or any foreign tax that corresponds to income tax or corporation tax in the State;

“country-by-country report”, in relation to an MNE group, means a report that contains the information set out in subsection (4);

“OECD” means the Organisation for Economic Co-operation and Development;

“OECD model legislation” means the Model Legislation Related to Country-by-Country Reporting contained in Annex IV to Chapter V of the OECD Report of 2015;

“OECD Report of 2015” means the ‘Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 – 2015 Final Report’ published by the OECD on 5 October 2015.

‘reporting entity’ has the meaning given to it by Article 1 of the OECD model legislation and shall be deemed to include an EU designated entity;

‘TIN’ means a unique identification number allocated to a constituent entity by a jurisdiction for the purposes of income tax and, in relation to the State, means a tax reference number within the meaning of section 885.

(2) An Irish resident ultimate parent entity of an MNE group shall provide to the Revenue Commissioners, not later than 12 months after the end of its fiscal year (being a fiscal year which commenced on or after 1 January 2016), a country-by-country report with respect to that MNE group for that year.

(3) Where an ultimate parent entity of an MNE group is Irish resident then it shall notify the Revenue Commissioners that it is an ultimate parent entity for the purposes of this section. The timing and manner of the notification shall be provided for in the regulations made under this section.

(4) A country-by-country report provided under subsection (2) must contain certain information. This information is identical to the information needed to complete the Model Template for the Country-by-Country Report set out in Annex III to Chapter V of the ‘Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 – 2015 Final Report’ published by the OECD on 5 October 2015.

For each tax jurisdiction that the MNE operates in the following information should be included on the country-by-country report:

• revenue,
• profit or loss before income tax,
• income tax paid,
• income tax accrued,
• stated capital,
• accumulated earnings,
• number of employees, and
• tangible assets other than cash or cash equivalents.

In addition, the country-by-country return should include:

• the identification and TIN of each constituent entity of the MNE group concerned,
• the jurisdiction of tax residence of such constituent entity and, where different from such jurisdiction of tax residence, the jurisdiction under the laws of which such constituent entity is organised, and
• the nature of the main business activity or activities of such constituent entity.

(5) The Revenue Commissioners can make regulations under this section with respect to the manner and form in which a country-by-country report is to be provided.

(6) The regulations made under this section may in particular:

• require a surrogate parent or an EU designated entity to provide a country-by-country report to the Revenue Commissioners and determine the date by which the report must be made,
• require a domestic constituent entity to provide a country-by-country report or equivalent country-by-country report to the Revenue Commissioners and determine the date by which the report must be made,
• amend the information to be included in an equivalent country-by-country report required to be provided by a domestic constituent entity,
• require and provide for the timing and manner of the notification of certain matters to the Revenue Commissioners by an ultimate parent entity, a surrogate parent entity, a EU designated entity or a domestic constituent entity of an MNE group,
• allow the Revenue Commissioners to notify a constituent entity resident in Ireland that there has been a systemic failure by the state of tax residence of its parent entity,
• specify and modify, as required, the manner and form in which a country-by-country report or an equivalent country-by-country report is to be provided to the Revenue Commissioners,
• make provision regarding the use and confidentiality of the information contained in country-by-country reports and equivalent country-by-country reports,
• require a domestic constituent entity of an MNE group to request information from its ultimate parent entity to allow it to complete a country-by-country report for the MNE group and, where the ultimate parent entity refuses to provide such information, require the domestic constituent entity to notify the Revenue Commissioners of that refusal within such time and in such manner as may be specified, and
• contain supplemental and incidental matters that the Revenue Commissioners consider necessary for the operation and implementation of the section.

(7) The penalties contained in Section 898O shall apply to a failure by a reporting entity to provide a country-by-country report or an equivalent country-by-country report to the Revenue Commissioners or the provision of an incorrect country-by-country report or equivalent country-by-country report or an incomplete country-by-country report.

(8)(a) The reporting entity is required to retain, and provide upon request for inspection, such records that may be reasonably required by the Revenue Commissioners to determine the accuracy of a country-by-country report or an equivalent country-bycountry report.

(8)(b) Such records shall be prepared on a timely basis and subsection (3) of section 886 shall apply to such records as it applies to records required by that section. There is a requirement to retain such records for 6 years beginning at the end of the fiscal year to which the country-by-country report or equivalent country-by-country report relates.

(8)(c) Sections 900 and 901 apply with necessary adjustments to such records as if they were books, records or other documents within the meaning of section 900, and to information, explanations and particulars that the authorised officer, within the meaning of those sections, may reasonably require, being information, explanations and particulars which are related to, or in connection with, a country-by-country report or an equivalent country-by-country report.

(9) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

(10) Notwithstanding section 851A, the Revenue Commissioners are authorised to communicate to the competent authority of another state information which is contained in a country-by-country report provided, in relation to states which are not EU Member States, that there is a qualifying competent authority agreement in place which allows for the exchange of such information.

(11) Any word or expression used in regulations made under this section will have the same meaning as given to it by Article 1 of the OECD model legislation, unless the contrary intention appears.

Relevant Date: Finance Act 2021