Tax transparency: country-by-country reporting shall now be made public

 On 12 April, the European Commission launched a new proposal for a Directive which imposes on multinational groups the publication of a yearly report on the profit and tax paid and other tax-related information. Only recently, on 8 March 2016, the EU Finance Ministers unanimously agreed on corresponding reporting obligations of multinational groups, however only vis-à-vis their respective national tax authorities. The new proposal is about the additional publication of this information.

The proposal is applicable to multinationals operating in the EU with a global annual turnover of EUR 750 million or more. The disclosure obligation shall comprise:

  • a brief description of the nature of the activities;
  • the number of employees;
  • the amount of the net turnover;
  • the amount of profit or loss before income tax;
  • the amount of income tax accrued in the current year;
  • the amount of income tax paid during the relevant financial year, and
  • the amount of accumulated earnings.

This information shall be provided for each member state where the company or the company group operates (hence the name "country-by-country-reporting"), made publicly available on the homepage of the company and remain there for five years. Concerning the territorial coverage, tax jurisdictions that do not abide by tax good governance standards (so-called tax havens) shall also be included. A list of such countries shall be drawn up by summer 2016. Legally, the new rules shall be introduced by amending the Accounting Directive (2013/34/EU).

The ECOFIN Council is expected to discuss the proposal in May 2016. The European Parliament, in this case acting as a co-legislator (Accounting Directive), will also have to ratify the proposal.

Further information