On 12 April 2016, the European Commission published a draft proposal for a directive amending the Accounting Directive 2013/34, which would require MNEs operating in the EU to draw up and publish tax reports.
The reporting obligations would apply to both EU and non-EU based multinational groups and stand-alone undertakings doing business in the EU, provided that their net turnover amounts to at least EUR 750 million.
The following information would have to be reported: (i) a brief description of the nature of activities of the undertaking and the ultimate parent, including activities of all affiliated undertakings reported in the consolidated financial statements; (ii) the number of employees; (iii) the amount of the net turnover including the turnover made with related parties; (iv) the amount of profit or loss before income tax; (v) the amount of income tax accrued; (vi) the amount of income tax paid; and (vii) the accumulated earnings. The report would also have to explain discrepancies between the amount of income tax accrued and income tax paid. This information would have to be reported separately for: (i) each Member State; (ii) each country contained in a list to be set up by the European Commission of those countries not fulfilling certain tax governance criteria; and (iii) all other countries on an aggregate basis. The report would have to be published within twelve months after the balance sheet date and should help the public at large to gain a better understanding of how much tax companies pay and where.
It is worth noting that the proposal goes even beyond the scope of the OECD's recommendations on Base Erosion and Profit Shifting ("BEPS") in Action 13 of its Action Plan. The proposal does not need unanimous consent in order to be adopted. Once it enters into force (which is not expected before the end of 2016), the amendment would have to be transposed into national legislation by all Member States within one year.
