PREPARATIONS OF MODIFICATIONS TO ACT ON ACCOUNTING

#53Preparations of modifications to Act on accounting

On 13th May, 2022, an inter-service consultation procedure was initiated on a draft law amending Act No. 452/2004 Coll. on accounting, as amended, and amending certain laws. This amendment is aimed at the publication of income tax information by certain undertakings and branches. The aim of this amendment is to increase transparency and promote the social responsibility of multinational companies that have exceeded a certain size.

The amendment is intended to transpose Directive 2021/2101 of the European Parliament and of the Council amending Directive 2013/34/EU. This directive sets out the reasons why it is necessary to increase transparency on this issue.

“More transparency in financial disclosure will be advantageous for all, since civil society will become more involved, employees will be better informed and investors less risk-averse. In addition, undertakings will benefit from better relations with stakeholders, which will lead to greater stability, along with easier access to finance due to a clearer risk profile and an enhanced reputation.“

Article 48b of that Directive defines precisely the undertakings and branches which are required to report on income tax information. They are entities that have achieved a net turnover of more than EUR 750 million for each of the two consecutive financial years and entities that prepare consolidated financial statements for the largest group of enterprises that have achieved consolidated income of more than EUR 750 million for each of the two consecutive financial years if they have a permanent place of business or a permanent establishment in the territory of more than one Member State.

Furthermore, large subsidiary entities that meet at least 2 criteria (assets more than EUR 4 million) In addition, in the case of a foreign parent whose foreign ultimate seat is located outside the territory of the Member States and whose consolidated income exceeds EUR 750 million, the turnover of more than EUR 8 million and 50 employees for 2 consecutive accounting periods) has a foreign ultimate parent established outside the territory of the Member States. In each of the two immediately consecutive financial years and in the case of a large establishment of a foreign legal person established outside the territory of the Member States, the revenue or consolidated revenue of which exceeded EUR 750 million in each of the two immediately following financial years, if they are not covered by the exemption from the obligation to report income tax information.

The amendment specifies the information on income tax to be included in the report. It is information relating to all activities:

1. a separate entity or a separate foreign entity for the financial year for which the report is prepared; or
2. the ultimate parent entity, including the activities of all its related entities consolidated in its consolidated financial statements, established for the same accounting period as the reporting of income tax information; or
3. the foreign ultimate parent entity, including the activities of all its affiliated entities consolidated in its consolidated financial statements, drawn up for the same accounting period as the report on income tax information.

In the absence of approval of the proposed legislation, Slovakia would not have fulfilled its obligation to transpose the EU Directive, which must be transposed by 22nd June, 2023.