EU public country-by-country reporting compromise offered

by Davide Anghileri

On 19 December the EU presidency released a draft proposal for the public disclosure of tax information by multinational groups. The proposal requires MNEs to file a public report disclosing income tax paid and other tax information if the MNE’s balance sheet reaches a total consolidated revenue of €750 million for the previous two consecutive financial years.

The proposal revises an earlier European Commission proposal, presented in April, that required MNEs with turnover of more than €750 million, whether headquartered in the EU or outside, to report publicly the income tax they pay together with other relevant information.

The presidency presented the new proposal aiming to better align public release of country-by-country reporting  with the accounting directive, 2013/34/EU.

Under the new proposal, the report must be made accessible to the public within 12 months after the balance sheet date of the financial year for which the report is drawn up.

Disclosure and publication would be required for all activities of all affiliated undertakings of a group consolidated by an ultimate parent undertaking or, depending on the circumstances, concerning all the activities of a non-affiliated undertakings.

In particular, the proposal now elucidates that MNEs should disclose the name of the ultimate parent undertaking or the non-affiliated undertaking; the financial year concerned; the currency used; the nature of the activities; the average number of employees during the financial year; total revenues. As in the previous draft, the proposal says that MNEs should reveal profit or loss before income tax; income tax accrued in the current year, which is the current tax; expense recognised on taxable profits or losses of the financial year by undertakings and branches resident for tax purposes in the relevant tax jurisdiction; income tax paid on cash (which is the amount of income tax paid during the relevant financial year by undertakings and branches resident for tax purposes in the relevant tax jurisdiction); and accumulated earnings.

Revenues are now defined as the sum of the net turnover, other operating income, and income from participating interests, minus dividends received from affiliated undertakings, income from other investments and loans forming part of the fixed assets, other interest receivable and similar income, or the income as defined by or within the meaning of the financial reporting framework on the basis of which financial statements are prepared, excluding value adjustments and dividends received from affiliated undertakings.

The proposal clarifies that the revenues include transactions with related parties. Taxes paid shall include withholding taxes paid by other undertakings with respect to payments to undertakings and branches within a group.

The proposal defines the accumulated earnings as the sum of the profit brought forward which was not distributed to members as of the end of the relevant financial year. With regard to branches, accumulated earnings shall be reported by the undertaking which opened a branch.

The proposal stipulates that the list of information is exhaustive ant that the information should be limited to what is necessary to enable effective public scrutiny to ensure that disclosure does not give rise to disproportionate risks or disadvantages for undertakings. For this reason, the list of information is exhaustive.

The proposal also allows member States to not require disclosure of  information when its nature is such that it would be seriously prejudicial to the commercial position of the undertakings to which it relates.

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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