EU: Political agreement on “public” country-by-country reporting requirements
Council of the EU and European Parliament provisional political agreement on EU public CbC reporting initiative
Council of the EU and European Parliament provisional political agreement
The Council of the EU and the European Parliament on 1 June 2021 announced that they have reached a provisional political agreement on the EU public country-by-country (CbC) reporting initiative. Read a KPMG report (March 2021) for details of the negotiating positions of the two EU institutions.
While the compromise text is not yet publicly available, according to an EU Council press release, the agreed rules would require multinational entities (MNEs)—whether headquartered in the EU or outside, with a total consolidated revenue of more than €750 million (in each of the last two consecutive financial years) and that are active in more than one country—to publish income tax information in each EU Member State, as well as in each third country listed on:
- The EU list of non-cooperative jurisdictions (Annex I of the EU Council conclusions on non-cooperative jurisdictions), or
- The “Grey List” list (Annex II or cooperative jurisdictions that are being monitored by the EU) for two consecutive years (read a KPMG report (February 2021) for details)
According to an announcement from the European Parliament (that is generally in line with the EU Council’s position), the types of data to be disclosed include:
- The nature of the company’s activities
- The number of full-time employees
- The amount of profit or loss before income tax
- The amount of accumulated and paid income tax and accumulated earnings
Under a “safeguard clause,” EU companies may, under certain conditions, defer disclosure of certain elements for a maximum of five years (a reduction from the initially proposed six years).
Reporting would take place within 12 months from the date of the balance sheet of the financial year in question. The information would need to be submitted to the trade registry of the relevant EU Member State and also be made available on the internet, using a common template, and in a machine-readable format.
The provisionally agreed text will be submitted to the relevant bodies of the EU Council and of the European Parliament for political endorsement. If the endorsement is obtained, the EU Council would adopt its position at first reading and the European Parliament would then approve the Council’s position. Next, the Directive would be published in the Official Journal of the EU and would enter into force on the 20th day following the date of its publication. According to the Council’s press release, EU Member States would have 18 months to transpose the Directive into national law (rather than the two-year period as initially provided for in the Council’s position).
The transposition deadline and date of application therefore would depend on the date when the Directive is official adopted and published. Assuming a transposition deadline of 1 January 2023, the rules could become applicable from 1 January 2024. EU Member States could nevertheless choose to apply the rules earlier than the set deadline.
For more information, contact a tax professional with KPMG’s EU Tax Centre
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