EU: Update on “public” country-by-country reporting proposal, following discussion by ministers

EU: Update on “public” CbC reporting proposal

Internal market and industrial ministers of the EU Member States on 25 February 2021 exchanged views on the proposed “public” country-by-country (CbC) reporting initiative.


The outcome of the meeting clarified that certain countries (for example, Austria) have changed their previous position and will now support the proposal for a public CbC reporting rule.

Considering the current legal basis and depending on further discussions in the Committee of the Permanent Representatives of the Governments of Member States (Coreper), the necessary support (qualified majority) to move forward with the proposal may be achieved. However, a number of EU Member States expressed concerns with regard to the appropriateness of the legal basis and the precedent it could potentially create. The position of these EU Member States is that this public CbC reporting would be a tax proposal, for which unanimity voting is required. The future therefore remains uncertain.   


The European Commission in 2016 presented a proposal on public CbC reporting requirements for multinational entity (MNE) groups headquartered in the EU and having a total consolidated group revenue of at least €750 million. The proposal would require public reporting of information about certain items such as revenue, number of employees, profit or loss before tax, tax accrued and paid, accumulated earnings, stated capital and tangible assets. 

The public CbC reporting initiative has been deadlocked due, in part, to disagreements on its legal basis and in particular whether the proposal would need to be based on:

  • Article 50 of the Treaty on the Functioning of the European Union (TFEU)—meaning that it would be subject to the ordinary legislative procedure and thus requiring a qualified majority voting in the Council, or 
  • Article 115 TFEU (that is, treated as a tax file)—meaning that it would be subject to the special legislative procedure, the common procedure used in tax matters and subject to unanimous approval at the EU Council level

Following concerns raised by certain EU Member States with respect to the sharing of sensitive data that might affect the competitiveness of the MNE, there was an attempt to address this issue in a 2019 compromise text by inserting a “comply or explain clause.” Under this clause, companies would be given an opportunity to omit some of the information otherwise disclosable when the disclosure would be seriously prejudicial to their commercial position. However, any omission would have to be explained and also made public in a later report on income tax information, within no more than six years from the date of its original omission.

Competitiveness Council Meeting on 25 February

During an informal public videoconference on 25 February 2021 of the Competitiveness Council configuration (COMPET), the Portuguese Presidency of the Council invited the ministers to express their views on a compromise text [PDF 443 KB] proposed by the presidency. The proposed text includes amendments meant to clarify the aim of the proposal and intended to improve transparency and reporting related to companies, in an attempt to strengthen the position that Article 50 is the appropriate legal basis. 

The Portuguese Presidency reiterated a commitment to move the proposal forward and noted that this was a political priority during their mandate. The commissioner for financial services, financial stability and capital markets union also participated in the exchange and note that, in the EC’s view, the legal basis chosen for the directive was correct because the text does not imply any changes to tax rules. 

With the exception of Lithuania and Slovakia, all other EU Member States took the floor to express their views on the proposal. There were 16 EU Member States broadly expressing their support for the compromise text proposed by the presidency, with some noting that although they do not agree with the legal basis, they are willing to compromise in the interest of breaking the deadlock. Germany abstained from expressing an opinion, while a debate on the issue continues within the German government. 

The other EU Member States either noted their support for transparency initiatives but expressed reservations on the choice of legal basis or expressed concerns regarding the impact the proposal may have on the competitiveness of EU MNEs (compared to those based in countries that do not impose such requirements). Of the countries opposing the qualification of the proposal of a non-tax file and hence the choice of legal basis, a majority expressed concerns regarding the precedent that this may create. In their view, EU Member States would need to remain sovereign on direct tax matters and therefore tax files (which they consider the public CbC reporting proposal to be) would continue to be subject to unanimous approval in the EU Council. 

In the closing of the exchange and also in a subsequent press release the Portuguese Presidency noted that  “a clear majority of ministers” were of the view that the compromise text was technically mature and concluded that there was political support for it to seek a negotiating mandate with the European Parliament. The file will be discussed by EU Member States’ representative in Coreper.

KPMG observation

A number of EU Member States (such as Austria and Estonia) that previously expressed reservations regarding the choice of legal basis for the public CbC reporting appear to be willing to compromise in the interest of moving ahead with the initiative, while noting (in the case of Estonia) that the adoption of the proposal based on qualified majority voting must not serve as precedent for the adoption of tax files. 

For a qualified majority to be obtained, a minimum of 15 (55%) of the EU Member States, representing at least 65% of the EU’s population must agree with the proposal. The exchange of views during the 25 February 2021 meeting indicates that these conditions could be met—however, it remains to be seen if sufficient support is garnered based on discussions in Coreper. 

Read a February 2021 report prepared by KPMG’s EU Tax Centre

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