small company accountant
Changes to Company Size Criteria and Abridgement Exemptions
On 24th December 2023, the EU Delegated Directive (2023/2775/EU) came into force which increased the total balance sheet and turnover thresholds for micro, small, medium and large companies, including groups, as set out in the Companies Act 2014 by approximately 25% to account for inflation.
E.U. member states have until 24th December 2024 to bring this legislation into effect.
Today, 19th June 2024, Minister for Enterprise, Trade and Employment, Peter Burke, TD signed into law the European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 (S.I. No. 301 of 2024) which comes into operation on 1st July 2024.
These size thresholds are contained in sections 280A to 280I of the Companies Act 2014.
Company size is typically determined by the company meeting two out of the three size criteria. Other relevant factors also apply.
These adjustments will result in more companies being categorised as micro or small which will, as a result, benefit from the abridgement and audit exemption. These changes are to apply to financial years commencing on or after 1st January 2024.
The increased size criteria/thresholds are as follows:
- Micro Company –a balance sheet total not exceeding €450,000, a net turnover not exceeding €900,000 and no more than 10 average employees.
- Small Company – a balance sheet total not exceeding €7.5 million, a net turnover not exceeding €15 million and no more than 50 average employees.
- Small Group- group balance sheet total not exceeding €7.5 million net (or €9 million gross), group turnover not exceeding €15 million net (or €18 million gross) and no more than 50 average employees.
- Medium Sized Company – a balance sheet total not exceeding €25 million, a net turnover not exceeding €50 million and no more than 250 average employees.
- Medium Group- group balance sheet total not exceeding €25 million net (or €30 million gross), group turnover not exceeding €50 million net (or €60 million gross) and no more than 250 average employees.
- Large Company – a balance sheet total not exceeding €25 million, net turnover not exceeding €50 million and more than 250 average employees.
FINAL POINTS
- The legislation comes into effect from 1st July 2024
- The measures apply for financial years beginning on or after 1st January 2024.
- Companies may elect to apply the measures on or after 1st January 2023.
- Large company continues to be one that does not qualify as micro, small or medium in accordance with the above.
- All other qualifying conditions remain the same.
Please click for Regulations: https://www.irishstatutebook.ie/eli/2024/si/301/made/en/pdf
For associated articles, please click:
Annual Return for Companies – Ireland – Accounts Advice Centre
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.
Do you provide digital services to Japan?
If you’re a provider of digital services to customers in Japan, please be aware that the changes being introduced on 1st October 2015 may affect you.
Old Rules
Under the Consumption Tax Act (Act No. 108 of 1988), a service rendered in Japan is subject to Consumption Tax which is equivalent to VAT (i.e. Value Added Tax).
The criteria for determining whether a service is rendered in or outside Japan varies, depending on the nature of the service.
Under the current rules (i.e. pre October 2015), the tax treatment relating to the provision of e-commerce services, such as e-books, internet delivery of music, etc. is determined by the location of the service provider.
Therefore, such e-commerce services provided by offshore service providers (e.g. companies located in Ireland) to Japanese customers are not subject to Japanese Consumption Tax under the current legislation.
New Rules
From 1st October 2015 there will be new rules. These will be different for (a) Business to Business services and (b) Business to Consumers services.
If, for example, an Irish company is providing digital services directly to Japanese consumers then the Irish company will be obliged to collect Consumption Tax from its customers in Japan and pay this collected Consumption Tax to the NTA or National Tax Agency.
As a result of this amendment, Irish companies/businesses providing digital services to Japanese customers will be required to file consumption tax returns. If this applies to you, it would be advisable to nominate a Tax Agent (i.e. an agent in Japan who will handle all the tax procedures necessary for foreign companies/sole traders/individuals).
For business to business transactions, a reverse-charge mechanism will be introduced. This requires the recipient of the service in Japan to declare both (a) the taxable sales and (b) the related tax due on its consumption tax return. There will be no obligation for the Irish company to file tax returns in Japan under these circumstances.
What should you do?
1. Identify the type of services you provide i.e. is it Business to Business or Business to Consumer services?
2. If it’s Business to Consumer service then you should contact the NTA’s website and register as a Foreign Supplier as soon as possible or alternatively contact a qualified and professional Tax Agent to handle your tax affairs.
3. You should review your terms and conditions to ensure that these changes are reflected.
4. You should review your processing procedures to ensure the mechanisms are in place for the correct collection of consumption tax.
What to keep an eye out for
You should keep an eye out for similar type emails from your Agents stating the following:
“A recent change to Japan Consumption Tax (JCT) regulations will impact your account.
Beginning on 1st October 2015, you will be responsible for determining and charging JCT for sales to customers in Japan.
The current JCT rate is 8%.
You will also be responsible for remitting and reporting on any JCT amount to the NTA (Japanese National Tax Agency)
This applies to all digital products sold to customers in Japan, even if your business is not located there.”