EU: Draft proposal on “public” country-by-country reporting

EU: Draft proposal on country-by-country reporting

A draft proposal from the European Commission (EC) on “public” country-by-country reporting would require multinational groups with a total consolidated revenue of €750 million to report either if they are EU parented or otherwise have EU subsidiaries or branches.

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The EC’s draft proposal emerged just a few days after a political agreement was reached at EU level on country-by-country reporting to tax authorities within the EU—that is, “non-public” country-by-country reporting.  Read TaxNewsFlash-BEPS

The EC had already indicated in an anti-tax avoidance package (January 2016) that it was analyzing how certain tax information could be made public by multinational firms on a country-by-country basis. It appears that the impact assessment that was to accompany this process has been completed and has come out in favor of public reporting. Apparently in anticipation of this, the EC had already announced that it would issue a legislative proposal in the spring of 2016. It appears that the proposal is intended to respond to recommendations for public country-by-country reporting made by the European Parliament in 2015. The proposal states that it takes account of responses to the EC’s 2015 public consultation to which KPMG member firms contributed. 

The initiative has three stated aims: (1) to align tax with economic activity; (2) to foster corporate responsibility; and (3) to promote fairer tax competition in the EU.

Details of the proposal

The report would require information on all members of the taxpayer group (i.e., including non-EU members) including:

  • Activities
  • Number of employees
  • Net turnover (including related party turnover)
  • Profit or loss before tax
  • Tax accrued and paid

The EU proposal for country-by-country reporting to tax authorities covers broadly similar information but is more extensive. That information must be listed for each EU Member State where the group is active, but may be aggregated for non-EU jurisdictions. 

Reports are to be published in a business register but also on companies’ websites, and are to remain accessible for at least five years. 

Only groups with a consolidated net turnover in excess of €750 million would be affected. When the ultimate parent is located outside the EU, the reporting generally would be completed by the EU subsidiaries or branches—unless the ultimate parent company publishes a report including those subsidiaries and branches. There is a carve out in this respect for “small” subsidiaries and branches as well as a general carve out for financial sector groups that report under the CRD IV rules. 

Reports will have to be audited and responsibility will lie with the management of the ultimate parent (if in the EU) or, in other cases, with the management of the EU subsidiaries or branches concerned. 

KPMG observation

The draft proposal for public country-by-country reporting currently does not indicate when or for what periods the new reporting requirements would be applied. This would depend in part on how swiftly the legislative debate proceeds. 

Before the proposal can be adopted, it will have to be approved both by EU Member State finance ministers in the ECOFIN Council as well as by the European Parliament. Given the latter’s recommendations made in 2015 to introduce similar rules, it seems unlikely that such approval would not be obtained. While tax-related legislation normally requires unanimous approval at ECOFIN level, in the case of the current proposal—which would be to amend the ‘Accounting’ Directive (2013/34/EU)—only a qualified majority would be required (i.e., 16 EU Member States representing at least 65% of the EU population). 


Read a March 2016 report prepared by the KPMG member firm in the Netherlands: EU Commission proposes public Country-by-Country Reporting

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