France has published, in the French Official Journal dated 22 June 2023, the transposition ordinance1 of the European Directive on "public country-by-country reporting" ("public CbCR") of 24 November 2021 that Member States had to transpose by 22 June 2023.
The Directive aims to compel multinational enterprises whose total consolidated revenue exceed EUR 750 million at their closing financial year, and for each of the last two consecutive financial years, irrespective of whether or not they are headquartered in the EU, to publish and disclose publicly an annual report including their profits, as well as taxes due and paid.
In more detail
Codified in the French Commercial Code, the ordinance essentially reproduces the main provisions of the European text, but refers to the adoption of decrees for the implementation and terms of certain rules.
The ordinance details in the articles 1 to 4 the enterprises covered by the public CbCR rules whose consolidated revenue exceed a threshold to be set by decree (the EUR 750 million threshold is not expressly included in the text of the ordinance), whether they are in France or abroad (standalone undertakings, ultimate parent undertakings and their subsidiaries and branches).
With regard to the form of the companies, the ordinance specifies that only commercial companies are concerned and for foreign companies those with a legal form comparable to joint-stock companies and limited liability companies. In the case of French société en nom collectif and société en commandite simple, the provisions apply only to those where all the partners with unlimited liability are French sociétés anonymes, sociétés à responsabilité limitée or foreign companies of comparable form.
The ordinance incorporates the Directive's requirement for subsidiaries undertakings or branches not subject to the above provisions to publish a report on income tax information where they serve no other objective than to circumvent the reporting requirements.
Entities operating in the banking sector, which are already subject to a country-by-country reporting obligation (in application of directive 2013/36/EU), are exempt from the public CbCR obligation (as provided for in the Directive).
The ordinance also specifies the items to be included in the report. This includes information relating to all the standalone undertaking's or ultimate parent undertaking's activities, including those of all related companies consolidated in the financial statements for the relevant year, i.e. a brief description of the nature of the activities, the number of full-time equivalent employees, revenues, the amount of profit or loss before income tax, the amount of income tax accrued, the amount of income tax paid on a cash basis, and the amount of accumulated earnings at the end of the financial year.
French subsidiaries or branches will have to collect the required information from their foreign ultimate parent undertaking. If the latter refuses to comply with this request, then the subsidiary or branch, via its legal representative in France, will have to publish only the information at its disposal, together with a statement that the parent company did not make the necessary information available.
A future decree will have to provide how to present this report, as well as the procedures for publishing and making it available. Following the Directive, the ordinance provides for a temporary safeguard clause, under which companies will be able to temporarily omit from the report information that is too sensitive ("where their disclosure would be seriously prejudicial to the commercial position of the undertakings to which the report relates"). However, it does not specify the duration of this omission, nor the conditions under which it may be carried out, for which it refers to a decree.
Lastly, as required by the Directive, the ordinance stipulates that statutory auditors will have to certify that the undertaking concerned has actually published the information in accordance with the provisions of the French Commercial Code relating to public CBCR.
The provisions of the ordinance apply to financial years beginning on or after 22 June 2024. Further details on the practical implementation of these new obligations will have to await publication of the decrees.