Obligations for Irish resident subsidiaries in certain multinational groups

Obligations for Irish resident subsidiaries

Ireland has introduced Country-by-Country (CbyC) reporting legislation for multinational groups with consolidated turnover exceeding €750million.

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Obligations for Irish resident subsidiaries in certain multinational groups

Ireland has introduced Country-by-Country (CbyC) reporting legislation in respect of accounting periods beginning on or after 1 January 2016, for multinational groups with consolidated turnover exceeding €750million. This will place an obligation on Irish parented multinational groups to file certain financial information in relation to the countries in which they operate. We previously referred to there being potential filing obligations for Irish resident subsidiaries of U.S. parented groups in 2016, and for Irish subsidiaries in groups parented in a country which does not have CbyC filing requirements or which does not share CbyC reports with other participating countries (“non-CbyC countries” e.g. Bermuda). This alert focuses on this point in greater detail.

Irish resident subsidiaries of groups parented in the U.S. are likely to have to file a CbyC report in respect of 2016 financial accounting periods as a result of the U.S. not introducing CbyC reporting legislation until later in 2016, which is expected to take effect for accounting periods commencing after that date.

Irish resident subsidiaries of U.S. parented groups and groups parented in non-CbyC countries must consider their position in respect of 2016 and subsequent years. These groups have 3 options in respect of their 2016 CbyC reporting obligations:

  • a) File an “equivalent” CbyC report in Ireland containing the information which the Irish company “has the power to obtain or acquire” i.e. the information which an Irish entity can legally acquire. Where the Irish entity submits an “equivalent” CbyC report, a full CbyC report may still be required in one of the other CbyC countries in which the Group has a presence. 
  • b) Nominate the Irish entity as the “surrogate parent entity”. This will require the Irish entity to prepare and submit a full CbyC report and Ireland’s Revenue authorities to share the information on the report with other competent authorities. Appointment of a “surrogate” should not require any of the other entities in the group to submit a report in their jurisdiction of residence. 
  • c) Nominate another group company in a different jurisdiction as the “surrogate parent entity”. This will require that entity to submit a full CbyC report in that jurisdiction, sharing of information by the jurisdiction’s competent authority and should not require any of the other entities in the group, including the Irish entity, to submit a report in their jurisdiction of residence.

Which of the above options is preferable for a group will depend on the particular group structure and foot print.

If the group has a subsidiary resident in at least one country which requires a “full” CbyC report to be submitted by that entity in the absence of a “full” CbyC report being filed elsewhere by a parent or a surrogate parent entity, the appointment of a surrogate parent entity is likely to be the most practical solution. Such a group may also wish to appoint a surrogate parent entity to avoid multiple filing obligations in multiple jurisdictions.

On 28 January 2016, the European Union (EU) issued a draft amending Directive to the EU Directive on Administrative Cooperation in Relation to Taxation (DAC4) which set out a proposed framework for CbyC reporting by EU Member States. The proposed framework which has yet to be agreed by EU Member States very closely follows the OECD approach. The EU has stated its objective of seeking EU-wide agreement within the next few months to implement the proposals for accounting periods beginning on or after 1 January 2016.

A number of EU and non-EU jurisdictions including Germany, Italy, France and Australia have already introduced or are in the process of enacting CbyC reporting for 2016. It is not yet clear whether those jurisdictions will require secondary filers to file full reports for the entire Group as the full details of their respective rules have yet to be finalised. The UK proposals for CbyC would not impose secondary reporting obligations on UK resident subsidiaries but the UK, like Ireland, anticipates that groups could select the UK as a surrogate parent jurisdiction.

Notification requirements

There are important notification requirements for all Irish resident entities forming part of a multinational group:

  • (i) If that entity is the ultimate parent entity or the surrogate parent entity which will file a report for the entire group, it must notify the relevant Revenue authority that it is such an entity; 
  • (ii) If a (non-Irish) ultimate parent entity or a surrogate parent entity is preparing and submitting the CbyC report for the entire group, an Irish group subsidiary must notify the Irish Revenue of the identification and jurisdiction of tax residence of that entity 
  • (iii) If an Irish entity has a secondary filing obligation it must notify Revenue of that fact.

These notifications must be made by 31 December 2016 for groups with calendar year ends, i.e. by the last day of the relevant accounting period.

In conclusion, the entity(ies) within a multinational group required to file a CbyC report will depend on the jurisdictions in which the group has a taxable presenceand whether those jurisdictions impose “full” filing requirements on subsidiaries resident in those jurisdictions, absent a filing by a surrogate parent for the entire group.

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