Taxes Consolidation Act 1997 section 111AJ

Transitional CbCR safe harbour

Section 111AJ introduces the Transitional Country-by-Country Reporting (CbCR) Safe Harbour, which allows MNE groups to treat their jurisdictional top-up tax as zero during a transition period running until 30 June 2028, provided certain conditions are met.

• An MNE group can qualify for the safe harbour in a jurisdiction by meeting one of three tests: the de minimis test (revenue below €10,000,000 and profit below €1,000,000), the simplified ETR test (effective tax rate at or above the transition rate of 15%–17%), or the routine profits test (profits no higher than the substance-based income exclusion amount).
• The safe harbour is not available for stateless entities, multi-parented MNE groups without a single comprehensive CbC report, or jurisdictions where an eligible distribution tax system election has been made; and if a group chooses not to apply it for a jurisdiction in any year, it cannot apply it for that jurisdiction in later years.
• Hybrid arbitrage arrangements entered into after 15 December 2022 — including deduction without inclusion arrangements, duplicate loss arrangements, and duplicate tax recognition arrangements — must be adjusted out of the profit and tax calculations used to determine safe harbour eligibility.
• Special rules apply to joint ventures (treated as a separate MNE group), investment entities (generally excluded and allocated to their owners' jurisdictions), flow-through entities, and entities subject to deductible dividend regimes, as well as to purchase price accounting adjustments and the allocation of taxes relating to permanent establishments and CFC regimes.

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