On 25 May 2016, the EU Council formally adopted EU CbyC rules.
The rules that have been adopted are not the separate EU “public CbyC” reporting proposals which have not yet been approved or adopted. This approval only relates to non-public CbyC reporting of information which will be shared between tax authorities and used by them for the purposes of high level risk assessment. The rules are closely aligned with the OECD rules which many countries, including Ireland, have already enacted into local law. The rules are to apply to EU-wide multinational groups (MNEs) with consolidated revenues > €750 million and apply to accounting periods commencing on or after 1 January 2016.
March’s draft proposal had “secondary reporting” requirements for certain non-EU parented groups which required EU resident subsidiaries of such groups to file a CbyC report for the entire MNE group. This was notwithstanding that they are not the ultimate parent entity and applies unless the group has appointed a suitable surrogate parent entity to file the CbyC report. The final proposal retains this and refines the scope of secondary reporting requirement by providing that:
The EU measures also permit MNE groups to designate a single EU resident entity to file a CbyC report for the group in its Member State of residence which will be shared by that Member State with all other Member States in which the MNE operates provided that the EU resident subsidiary has sufficient information to file a complete group CbyC report.
The new measures are to apply to 2016 financial periods commencing on or after 1 January 2016. Member States have the option to defer implementation of the secondary reporting requirements for non-EU parented MNEs to financial periods commencing on or after 1 January 2017. This is of particular relevance to US parented groups as it is not expected that the final US CbyC regulations will be in place before the end of June 2016 and are to apply to accounting periods commencing after they become final (see our alert of 15 March for further commentary on this).
In the course of transposing the final EU requirements into Irish law, Ireland will have the opportunity to revisit whether it should amend its existing CbyC regulations to defer the implementation of secondary reporting to 2017. It may also be possible that Ireland (and other Member States) will accept ‘voluntary’ reporting by parent entities resident in jurisdictions which facilitate early adoption by parent entities of measures otherwise applying after the EU implementation timeframe (e.g. the U.S.).