Country-by-country reporting: all change in the EU?

March 2017

With country-by-country (CbC) notifications in many jurisdictions now imminent or already due, a recent Draft Report from the European Parliament appears to introduce swingeing amendments to the European Commission's previous proposals on CbC reporting, suggesting that the current EUR 750 million turnover threshold be reduced to EUR40 million: an initiative which could have serious implications for mid-tier groups.

A new EUR 40,000,000 reporting threshold?

Published in February 2017 by the European Parliament Committee on Economic and Monetary Affairs and the Committee for Legal Affairs, the Draft Report* proposes the following amendment on reporting thresholds - which, moreover, will apply to activities worldwide, and not just entities based in the EU:

Member States shall require subsidiary undertakings which are governed by their national laws and controlled by an ultimate parent undertaking which has a consolidated net turnover exceeding EUR 40,000,000 and which is not governed by the law of a Member State, to publish the report on income tax information of that ultimate parent undertaking on an annual basis.

The Draft Report further proposes that data cannot be aggregated, but must including information on specific jurisdictions worldwide, including those outside of the EU:

The report on income tax information should provide information concerning all the activities of an undertaking or of all the affiliated undertakings of a group controlled by an ultimate parent undertaking...

Public disclosure of all filings?

Whereas the Commission's recommendations had suggested only that CbC reporting data "be made accessible to the public on the website of the undertaking on the date of its publication", the European Parliament goes much further, requiring the use of a common template, and the establishment of a Public Register:

The report on income tax information shall be published in a common template available in an open data format and made accessible to the public on the website of the undertaking on the date of its publication in at least one of the official languages of the Union. On the same date, the undertaking shall also file the report in a public registry managed by the European Commission.

A new - and unexpected - burden for mid-tier groups?

Clearly, a measure initially intended to impact only the largest multinational entities (MNEs) could now involve a substantially greater number of mid-tier groups in extensive compliance regarding their individual entities and group activities.

Edwin Kleefstra, director and tax advisor at Russell Bedford member firm Stolp+KAB in the Netherlands, commented: "While it remains to be seen whether the proposals in the European Parliament's Draft Report are ever enacted in law, this does perhaps signal a clear determination on the part of the European Parliament to tackle tax avoidance - at every level - within the EU and worldwide. This could pose a major new challenge for mid-tier organisations with multi-jurisdictional operations - and their advisors. Such companies would be well advised to re-examine their cross-border accounting systems and, as far as possible, assess how these can be adjusted to meet any new or additional reporting requirements."

*"DRAFT REPORT on the proposal for a directive of the European Parliament and of the Council amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches", (COM(2016)0198 - C8-0146/2016 - 2016/0107(COD)), February 2017, available at:

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