On 12 April 2016, the European Commission proposed to introduce public country-by-country reporting (CbCR) for large multinational enterprises (MNEs). In its Anti-Tax Avoidance Package, released in January 2016, the Commission already indicated it was looking at the issue of public CbCR. The current legislative proposal to introduce public CbCR is published only a few weeks after the Council of the European Union reached political agreement on non-public CbCR to national tax authorities of the EU Member States (see our general Q&A on CbCR). It is yet another EU initiative aimed at enhancing transparency and public scrutiny on corporate income tax affairs of MNEs.
According to the draft proposal:
- The annual public CbCR obligation would rest on MNEs with a total consolidated group revenue exceeding EUR 750 million. If the ultimate parent company is based outside the EU, the public CbCR obligation would apply to medium-sized or large subsidiaries or branches in the EU, unless those subsidiaries and branches are included and specified in a report published on the website of the ultimate parent.
- An exemption may apply to EU ultimate parent companies of banking groups already disclosing information under the EU’s Capital Requirement Directive.
- The information to be published is less extensive than under non-public CbCR requirements and would comprise: the nature of the activities, the number of employees, the net turnover (including with related parties), the profit or loss before tax, the tax accrued and paid and the amount of accumulated earnings. The public CbCR report shall present this information for each EU Member State where the MNE is active (country-by-country basis), whereas the information regarding activities outside the EU will in principle be presented for all jurisdictions combined. However, for non-EU tax jurisdictions which do not comply with certain good governance standards in taxation, a breakdown will be required if transactions take place with affiliates in the EU.
- Reports are to be published in a business register and on companies’ websites where they need to remain publicly available for at least five years. The reports will need to be audited and responsibility for drawing up and publishing the report on tax information will lie collectively with the members of the administrative, management and supervisory board of the reporting entity or the head office of the branch.
It has not yet been indicated when and for which period EU Member States would need to apply the proposed rules for the first time. The proposal needs to be approved by both the Council of the European Union and the European Parliament and may be amended.