Adoption of the EU directive on public country-by-country reporting


On 11 November 2021, the European Parliament formally approved the EU Directive on public country-by-country reporting (the Directive). The Directive aims at increasing corporate transparency and enhancing public scrutiny of large businesses. The Directive requires multinational enterprises (MNEs) (headquartered within or outside the EU), whose consolidated revenue for each of the last two consecutive financial years exceeds EUR 750 million, to publish a report on income tax information in each Member State and third country listed on the EU list of non-cooperative jurisdictions for tax purposes (either in Annex 1 (black list) or in Annex II (grey list)) where they are active.

No disclosure will be required if all the companies (i.e., ultimate parent, subsidiaries, branches) of the MNE are established in a single Member State. Also, a specific exclusion exists under certain conditions for the banking sector where credit institutions which are already subject to reporting obligations under article 89 of Directive 2013/36/EU of the European Parliament and of the Council will be exempt from this new reporting obligation.

The report will provide information regarding among others, the nature of the activity of the MNE, number of employees, revenues, amount of profit or loss before income tax, income tax accrued during the relevant financial year, amount of income tax paid on a cash basis and the amount of accumulated earnings. MNEs will be granted the possibility to defer the disclosure of specific information for five years where such disclosure would be seriously prejudicial to the commercial position of the undertaking. In such situation, any omission will need to be indicated in the report and the reason for such omission needs to be explained. This safeguard clause will not be applicable when information to be omitted relates to non-cooperative jurisdictions for tax purposes.

The information is expected to be reported under an electronic template and the report will need to be published within 12 months after the balance sheet date of the financial year for which the report is drawn up. When applicable, statutory auditors and audit firms will be required to state whether, the undertaking was required to publish a report on income tax information and if so, whether the report was published in accordance with the provisions of the Directive.

Finally, it is worth noting that members of the administrative, management and supervisory bodies of the MNEs will have collective responsibility for ensuring that the report is drawn up, published, and made available in accordance with the rules of the Directives.

The Directive has been published in the Official Journal of the European Union on 1st December 2021 and will enter into force on 21 December 2021. The Directive will need to be transposed into national law within 18 months after its entry into force.

In conclusion, these reports are not expected to be applicable and published until 2025 (or 2026) and they should not disclose new information to the tax authorities. However, it will be a new reporting obligation that MNEs will have to comply with and that will be directly available in the hands of public scrutiny.