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Bob van der Made |
The European Commission (EC) has proposed legislation requiring public country-by-country reporting (CbCR) from many EU enterprises.
The reporting applies to groups with a consolidated turnover exceeding €750 million. For EU-headquartered groups, the obligation falls on the ultimate parent enterprise in the EU. For groups headquartered outside the EU, the obligation falls on their medium and large sized subsidiaries and branches within the EU. This public CbCR initiative takes the form of a proposal to amend the Accounting Directive (Directive 2013/34/EU of the European Parliament and the Council); to be approved, both the Council and the Parliament will need to agree on a final compromise text. In requiring public disclosure of CbCR information, the EU is proposing to go further than Directive 2011/16/EU (DAC4), which only implements within the EU the OECD BEPS Action 13 CbCR requirements regarding the disclosure of information to tax authorities.
This public CbCR proposal applies to enterprises in all industry sectors (including the banking, extractive and logging sectors), except those financial institutions that already prepare public CbC reports under the Article 89 of the CRDIV directive, provided such reports cover all activities (financial and non-financial) of the group.
In some respects the information to be disclosed is similar to that which will have to be disclosed to tax authorities in accordance with the BEPS Action 13/DAC4.
The EC proposal introduces a reporting obligation for MNCs regardless of whether their headquarters are inside or outside the EU. Where an MNC group has its headquarters outside the EU, its medium and large sized subsidiaries and branches in the EU will be required to file a CbCR report for the whole group unless the non-EU parent makes the relevant information publicly available.
The proposal requires the information listed below to be provided in an understandable and comprehensive way and to refer to an enterprise's activities in each member state. The information must be provided for each member state and for each tax jurisdiction included on a list of jurisdictions deemed by the EU not to meet certain criteria for good standards of tax governance. Data for all other non-EU tax jurisdictions may be aggregated.
The following data must be disclosed:
Nature of the enterprise's activity;
Number of persons employed;
Net turnover including with related parties;
Profit/loss before tax;
Current year corporate income tax accrued;
Corporate income tax paid in the current year; and
The amount of accumulated earnings.
The report must include a group level explanation of differences between the amounts of tax paid and accrued.
The report must be published and made accessible on the corporate website in at least one of the official languages of the EU. The report must also be filed with the appropriate business register.
The enterprise's administrative, management and supervisory body will be responsible for disclosing the required information in accordance with the proposed Directive. In the case of a branch of a non-EU parent, the persons representing the enterprise in the EU will be responsible for the disclosure. An enterprise's statutory auditors will be required to confirm that a disclosure has been made and is accessible. According to the EC's proposal, infringements and omissions will be sanctioned by penalties levied on the MNEs or the subsidiaries or the branches of non-EU enterprises.
The EC's proposal is accompanied by a 162-page impact assessment formally underpinning the EC's proposal.
The EC's proposal is to be approved by both the EU Parliament and the Council and, once adopted, will have to be transposed into the member states' national legislation within one year after its entry into force. It remains to be seen at this stage whether the proposal will pass in Council. So-called 'final stage compromise Trilogue' negotiations between delegations of the EU Parliament, the Council and the Commission, to hammer out a deal, are expected to start at the very earliest after the summer.
Bob van der Made (bob.van.der.made@nl.pwc.com), Brussels
PwC EU Public Affairs / EU direct tax group
Tel: +31 88 792 3696
Website: www.pwc.com/eudtg
