The European Commission has last month introduced a proposal to amend the Accounting Directive (Directive 2013/34/EU) in order to create public country-by-country tax transparency rules for multinational enterprises operating in the EU. To enhance the sharing of information between tax authorities, the new rules would require multinationals operating in the EU — European or not — with global revenues exceeding EUR 750 million a year to publish key information on where they make their profits and where they pay their tax in the EU on a country-by-country basis.
The information to be disclosed on a country-by-country basis would include:
- the nature of the activities;
- the number of employees;
- the total net turnover, which includes the turnover made with third parties as well as between companies within a group;
- the profits before tax;
- the amount of income tax due in the country on the profits made in the current year in that country;
- the amount of tax actually paid during that year; and
- the accumulated earnings.
This information would have to be disclosed with respect to each and every EU country in which a company is active, as well as for the so-called tax havens. Aggregate figures would also have to be provided for operations in other tax jurisdictions in the rest of the world. Reporting should also include explanations on discrepancies between the amounts of income tax actually paid and income tax accrued. This information would be made available in a stand-alone report accessible to the public for at least five (5) years on the company’s website. Companies would also have to file the report with a business register in the EU.
This proposal is closely linked to the revision of the Administrative Cooperation Directive, politically agreed by EU Member States in March 2016, which requires certain multinational enterprises to submit a country-by-country report to EU tax authorities. The Directive proposal will then be submitted to the European Parliament and Council for their consideration and final adoption by a qualified majority of the Council. Once adopted, the new Directive would have to be transposed into national legislation by all EU Member States, within one year after the entry in force.