EU COUNTRY-BY-COUNTRY REPORTING: ADOPTED  

On May 25, 2016, the European Union’s Economic and Financial Affairs Council (ECOFIN) voted unanimously in favor of the implementation of proposed country-by-country reporting (CbCR) rules for multinational companies in the EU. The EU CbCR will be implemented via a previously proposed amendment of the EU Directive on exchange of information.

The CbCR rules for the greater part follow the OECD BEPS guidelines as laid out in BEPS Action 13, but will accelerate further adoption of the CbCR standards within the EU.

EU member states will have to adopt CbCR legislation requiring multinationals to report for fiscal years from January 1, 2016 onwards. There will be an option for member states to introduce CbCR as of January 1, 2017 for multinationals that have a non-EU parent company that does not file a CbCR report in its jurisdiction of residency and therefore requires filing through a so-called secondary filing in the EU (a EU surrogate parent).

EU ANTI-TAX-AVOIDANCE DIRECTIVE: NO CONSENSUS − YET During the same meeting, the ECOFIN failed to reach consensus on the proposed EU Anti-Tax-Avoidance (ATA) Directive. The first draft of the proposed ATA Directive was released by the European Commission on January 28, 2016, followed by several updated drafts resulting from political discussions and compromises.

The proposed ATA Directive includes six concrete provisions against tax avoidance and aims to end cross-border tax avoidance, base erosion and profit shifting by taking a coordinated approach to the OECD’s initiative against Base Erosion and Profit Shifting (BEPS). It has become apparent that several member states are, to a greater or lesser degree, opposing some of the provisions set out in the proposed ATA Directive. Only a few EU member states (France, Germany and Slovakia, for example) expressed unqualified approval for the EU ATA Directive, which was prepared under the Dutch Presidency.

The elements of the EU ATA Directive that are the most controversial are:

  • The proposed switchover clause (article 6 of the proposed Directive)
  • The proposed Controlled Foreign Corporation provisions (article 8 of the proposed Directive) and
  • The limited scope of application of the proposed rules on hybrid mismatches (article 10 of the proposed Directive).

During the next ECOFIN Meeting, on June 17, 2016, there will be a new voting round and thus a possible political agreement on an amended EU ATA Directive.

Again, there is little doubt that there will be intense political discussion on the text of the EU ATA Directive. In any case, Dutch Finance Minister Jeroen Dijsselbloem stated that he is confident an agreement will be reached during the June ECOFIN Meeting. The Dutch Presidency's term ends on June 30, 2016, but this does not mean the end of the Directive. Many expect that, should no political agreement be reached, Slovakia, which holds the next Presidency, will continue to pursue these ambitious EU goals.

Learn more about these issues in our earlier alerts on the EU’s moves to achieve public CbC reporting and put in place anti-tax-avoidance rules.