Insights

Country by Country Reporting Requirements

Investment Funds Industry

Ireland has implemented legislation on country by country reporting and signed a multilateral agreement (along with 30 other countries) providing for the automatic exchange of “country by country” (CbC) reports with other participating jurisdictions in relation to certain multinational (MNE) groups. Under the proposed provisions, countries will be required to exchange reports received with other participating jurisdictions.

We have set out below a brief summary of the legislative provisions and considered the impact for the investment funds industry in Ireland. While the CbC reporting provisions may not apply to many Irish investment vehicles, some may unexpectedly be impacted due to the current legislative provisions and implementation guidelines published by the OECD and Irish Revenue.

Irish CbC Reporting Requirements – A Brief Overview

An Irish resident ultimate parent entity of an MNE Group (broadly, one with annual consolidated revenue in excess of €750 million in the immediately preceding accounting period) will be required to file a group CbC report with Irish Revenue effective for accounting periods commencing on or after 1 January 2016. The CbC report will then be shared with other tax authorities through automatic tax exchange protocols, such as those contained in tax treaties and tax information exchange agreements.

Where the laws of the ultimate parent entity’s country does not require that entity to file a CbC report, the Irish legislative provisions set out a secondary filing mechanism, under which the MNE Group can designate an Irish resident constituent entity to act as a “surrogate parent” and file a CbC report with Irish Revenue on behalf of the entire Group. Further, if an ultimate parent entity or a surrogate parent of an MNE Group is not filing a CbC report or if there are issues with the automatic exchange of such reports (e.g. relevant jurisdiction has not concluded an agreement for the automatic exchange of the CbC reports or they have such an agreement but it has been suspended or they otherwise fail to exchange the reports automatically), there will be a requirement for a local country filing with Irish Revenue (known as “an equivalent CbC report”). An equivalent CbC report is only required to include information to the extent that it is within the custody or possession of the Irish resident constituent entity or that the Irish entity has the power to obtain such information.

Notification Requirements

It is important to note that an Irish resident constituent entity of an MNE Group will be required to make certain notifications to Irish Revenue in relation to its status for CbC reporting purposes before the end of the relevant reporting period. As such, companies within the remit of CbC reporting in respect of the year ended 31 December 2016 are required to make a notification to Irish Revenue before the end of December 2016. If the company has a non-December year end it will be required to make a notification on or before the end of its relevant reporting period (e.g. if an MNE group has a 31 March 2017 year end the Irish resident constituent entity will be required to make a notification to Irish Revenue on or before 31 March 2017). It is anticipated that these notifications will be required to be made via electronic means (presumably via ROS, although this has not yet been confirmed).

It is important to note that even if the Irish resident constituent entity of the MNE group will not have any responsibility for filing the CbC report, either as an ultimate parent or surrogate parent, there is still a notification responsibility for the company before the end of 2016 (where the year-end of the ultimate parent of the MNE Group is 31 December 2016) or before the end of the relevant report period for non-December year ends. Please see below a matrix summarising the relevant reporting obligations for Irish resident constituent entities of an MNE Group.

Investments Funds

The OECD issued additional guidance on 29 June 2016 in relation to the implementation of CbC reporting. The guidance confirms that there is no general exemption from CbC reporting for investment funds. The governing principles to determine whether an investment fund is part of an MNE group (and exceeds the €750m threshold) are the accounting consolidation rules. If accounting rules require an Irish investment fund to consolidate the results of a non-Irish resident subsidiary and the €750m threshold is exceeded, then an MNE Group exists and the relevant CbC reporting and notification obligations for the Irish entity should be considered.

Additionally, while unusual in practice, if the results of an Irish investment fund are consolidated into the financial statements of a non-Irish resident entity and the €750m threshold is exceeded, it should be considered whether there may be a requirement to file a CbC report in Ireland. From a practical perspective, the existence of an MNE Group of this type may be difficult to establish, as the decision to consolidate may not rest with the fund or its manager, but rather with an unrelated third party investor.
 

Immediate Actions

Irish investment vehicles should consider whether they fall within the remit of the MNE Group rules, either by consolidating other entities’ results into their accounts or by virtue of being consolidated themselves. If the CbC reporting rules are found to apply and the entity is deemed to be either an ultimate parent, a surrogate parent or a constituent entity, then a notification will be required to be made to Irish Revenue by 31 December 2016 for the accounting year ended 31 December 2016 (or before the end of the relevant report period for non-December year ends) and the relevant CbC reporting requirements should be considered.

CbC Reporting and Notification Matrix

Status of Irish Resident Constituent Entity

Information Required

Notification Deadline to Irish Revenue

CbC report or Local Filing Deadline with Irish Revenue

Ultimate Parent of MNE Group

Notification that the company is the ultimate parent entity of an MNE Group for the relevant reporting period.

On or before the end of the relevant reporting period for the Group. For example, a notification will be required to be made on or before 31 December 2016, for the 31 December 2016 financial year. If the financial year of the MNE group is 31 March 2017 the notification would be required to be made on or before 31 March 2017.

An equivalent local report is required to be filed with Irish Revenue within 12 months from the end of the accounting period (e.g. 31 December 2017, for the 31 December 2016 financial year or 31 March 2018, for the 31 March 2017 financial year).

Appointed Surrogate Parent of MNE Group

Notification that the company is an appointed surrogate parent entity of an MNE Group for the relevant reporting period.

Neither Ultimate Parent nor Appointed Surrogate Parent but a local Equivalent CbC report is required.

Notification that the company is an Irish constituent entity of an MNE Group and is a reporting entity for CbC reporting purposes.

None of the above (i.e. a foreign ultimate parent or surrogate parent is filing on behalf of the Group in another jurisdiction).

The identity and jurisdiction of tax residence of the relevant reporting entity in the MNE Group.

N/A.  CbC reporting gets shared with Irish Revenue automatically via tax exchange protocols.

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