EU Presidency offers compromise proposal for public country-by-country tax reporting by multinationals

by Davide Anghileri

Malta, as holder of the EU Presidency, has offered a compromise proposal to the EU Council that would require large multinational enterprises to publicly disclose tax information on a country-by-country basis.

The compromise text, presented to the Council 23 June, would amend Directive 2013/34/EU as regards to disclosure of income tax information by certain undertakings and branches.

The new draft is weaker then prior draft proposals, particularly as compared to the 9 February proposal prepared by the EU Parliament’s Committee on Economic and Monetary Affairs and Committee on Legal Affairs, probably due to economic pressure.

The new draft, in fact, seems designed to protect the EU market and follow the OECD/G20 base erosion profit shifting (BEPS) plan recommendations, which did not opt for public country-by-country reporting.

Under the compromise text, the threshold for required reporting by undertakings and branches is considerably higher than the EU Parliament proposal.

Ultimate parent undertakings (and undertakings that are not affiliated undertakings) which, as of their balance sheet date, exceed for each of the last two consecutive financial years a total consolidated revenue of €750 million on their consolidated financial statements, must publish and make accessible a report on income tax information as regards the later of the last two consecutive financial years. The Parliament, in its draft, suggested a threshold of €40 million consolidated net turnover.

The new proposal provides that a subsidiary that has a non-EU ultimate parent must ask the parent to provide it with all information required to enable it to meet its obligation.

If the information is not provided, the subsidiary must publish and make accessible a statement explaining why the report on income tax information is not available.

As was the case in previous versions, the draft states that the responsibility of an EU subsidiary to publish and make accessible the report on income tax information should be limited, given that the subsidiary may have limited knowledge of the content of the report on income tax information prepared by the ultimate parent undertaking or may have limited ability to obtain such information or report from their ultimate parent undertaking.

The drafts postulates that Member States should give companies the option to provide information not only following the provisions of the draft or following the reporting specifications referred to in Annex III, Section III, Parts B and C of Directive 2011/16/EU, as regards administrative cooperation in the field of taxation (country-by-country report). This means that companies may have two different option to transmit the information.

Moreover, it adds the possibility for Member States to omit information when it would be seriously prejudicial to the commercial position of the undertakings to which it relates, and when only a single affiliated undertaking operates in a tax heaven. Every omission should be subject to a prior administrative or judicial authorisation for a period of one year, which may be renewed, and disclosed in the report is undertaken.

 The Commission is also called to “consider issuing recommendations on how to ensure that global dis-aggregation may be achieved particularly in international fora,” to maintain a level playing field regarding the EU’s exchange of information duties with respect to the rest of world.

 In fact, the aim of the proposal is to ensure that the European Union maintains its leadership in the development and promotion of best practices within the international community, and at the same time safeguard the competitiveness of European market, said Edward Scicluna, President of Ecofin, in a press release issued by the Maltese Ministry of Finance.

Davide Anghileri

Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.

Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues. He can be reached at

Davide Anghileri

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