Public country-by-country reporting: new transparency requirements
On 28 September 2021, the Council of the European Union adopted its position on the proposed directive on the disclosure of income tax information by certain undertakings and branches (the “public country-by-country reporting” or “pCBCR” Directive).
Reporting obligations
The pCBCR Directive requires certain multinational undertakings (groups and standalone undertakings) with a total consolidated revenue of more than € 750 million in each of the last two consecutive financial years to disclose publicly the income tax paid, together with other relevant tax-related information. This other information comprises for example the identities of the different companies, the nature of their activities, the number of employees, the revenues and the results (profits/losses). Importantly, the Directive applies whether or not the enterprise is headquartered in the European Union and thus also targets non-European multinationals doing business in the European Union through subsidiaries and branches.
The information should be publicly disclosed on a country-by-country basis for European Union Member States and for black listed or grey listed jurisdictions. For other third-country operations, the information should in principle be given on an aggregate basis.
The reporting must be done within 12 months of the end of the financial year. Under certain conditions, the Directive does however allow deferral of the disclosure of sensitive information for a maximum of five years.
Next steps
The adopted text will now proceed for formal approval by the European Parliament, after which the Directive will be published in the Official Journal of the European Union. The Directive will enter into force on the 20th day following its publication, and Member States will have 18 months from that time to transpose the Directive into national law. Therefore, if the Directive were to enter into force in December 2021, it should be transposed into national law by June 2023 and the rules will likely be applicable at the latest for financial years starting in or after June 2024. Member States can however freely choose to apply the rules earlier than the deadline.
We are happy to discuss these new requirements and their potential impact with you.
