Amendment to the Act on Accounting introduces the new report on income tax information
The amendment to the Act on Accounting No. 407/2022 Coll. reflects the transposition of Directive (EU) 2021/2101 as regards disclosure of income tax information and introduces obligation for selected accounting entities to make a report on income tax information. The purpose is to increase corporate transparency, enhance public scrutiny of multinational undertakings and evaluate their contribution to the welfare of the society.
In connection to transposition of Article 48 of Directive (EU) 2021/2101 of 24 November 2021 as regards disclosure of income tax information by certain undertakings and branches (the “Directive”), the Act on Accounting (the “Act”) is amended by provisions on reporting information of multinational undertakings, as well as information about tax jurisdiction of third countries. These changes enter into force on 22 June 2023 and for the first time, will be applied for a report on income tax information for accounting period starting on 22 June 2024 or later.
Amended Act introduces and specifies definitions relating to reporting on income tax information, such as ultimate parent accounting entity, standalone accounting entity, foreign accounting entity, branch of foreign accounting entity, consolidated financial statement of foreign accounting entity, and revenue of foreign accounting entity.
Furthermore, Act requires obligation to make a report on income tax information for the following accounting entities:
- ultimate parent accounting entity, where the consolidated revenue, as reflected in the consolidated financial statement according to IFRS/EU, exceeded for each of the last two consecutive financial years a total of EUR 750 mil.
- standalone accounting entity, for each of the last two consecutive financial years if:
· the revenue, as reflected in the annual financial statement according to IFRS/EU, exceeded EUR 750 mil.
· the net turnover, as reflected in the annual financial statement not applied according to IFRS/EU, exceeded EUR 750 mil.
- large companies if they are controlled by an ultimate parent accounting entity meeting the size criteria.
- branches of foreign entities if a report on income tax information is concerning their foreign ultimate parent accounting entity or foreign standalone accounting entity which meet the size criteria.
Simultaneously, if the above-mentioned accounting entities are obliged to prepare a report on income tax information, they shall file this report in the register and in the collection of the Commercial Register.
This new obligation does not apply to accounting entities that are tax residents within the territory of the Slovak Republic, including their affiliated undertakings and branches, or if accounting entities publish their annual reports according to Article 37 (6) of the Act No. 483/2001 Coll. (act on banks), that encompass information on all their activities and on all the activities of all the affiliated undertakings included in the consolidated financial statements of ultimate parent accounting entity. The exemption from the obligation to file a report on income tax information for large companies and branch of foreign entity applies to the report, which is accessible to public, free of charge, in an electronic format on the website of the foreign ultimate parent accounting entity or foreign standalone accounting entity, in at least one of the official languages of the EU, and meets the criteria set out in Act.
Act also introduces obligation to state in the audit report whether the accounting entity was required to prepare and publish a report on income tax information. This change will be applied for the first time in the audit report prepared for the accounting period starting on 22 June 2025, or later.
The content of the report on income tax information still remains the open question, as this part of the Directive has not been transposed. Information about the content and required terms will be set by measure of the Slovak Ministry of Finance.