The European Commission has published the implementing regulation on public country-by-country reporting, providing the final common template and electronic reporting formats—jointly referred to as the final guidance. While it clarifies specific data requirements of the individual member countries, it leaves several questions unanswered.
This European tax transparency initiative applies to all multinational groups with a consolidated revenue exceeding a 750 million-euro ($782 million) threshold for two consecutive years, where the ultimate parent undertaking is either based in the EU or based in a third country and operates in the EU through a qualifying subsidiary or branch.
The final guidance clarifies that companies can voluntarily disclose more information than the minimum requirement. Since EU public country-by-country reporting is effectively a subset of the data from the OECD (private) CbC report, this option allows for a full disclosure of the OECD CbC report—for example, including a split in revenue between related and unrelated parties. This option may reduce the administrative burden for multinational groups.
The final guidance stipulates that non-EU headquartered multinational groups and their reporting subsidiaries aren’t covered by the obligation to use the common template and electronic reporting format. This rule also applies to subsidiaries of non-EU headquartered multinational groups where the ultimate parent undertaking doesn’t provide all required information.
Implementation Questions
A key question relates to the reporting requirement by non-EU headquartered multinational groups. The final guidance doesn’t clarify how to deal with deviations from the EU Directive by EU member countries, prolonging the uncertainty due to a patchwork of local requirements that must be followed.
In contrast to OECD CbCR, which can appoint a surrogate parent responsible for fulfilling the compliance obligation for all or most of the group entities, such a concept isn’t included in EU public CbCR.
Another open question is the definition of “commercially sensitive information,” which can be omitted from the EU public CbCR in member countries that adopted the safeguard clause.
While it’s expected that multinational groups applying the safeguard clause need to substantiate why information is “commercially sensitive,” it’s unclear how to provide such substantiation, what would qualify as commercially sensitive, and whether jurisdictions may have different views on this.
It also remains unclear how non-EU headquartered multinational groups should approach the local requirements set by member countries. These groups will have local filing obligations in each EU member country where they have a qualifying presence, and the content of the report may differ slightly because of differences from transposing the directive into national law.
As an example, some member countries require disclosing European Economic Area countries—Iceland, Liechtenstein, and Norway—on a line-by-line basis like EU member countries. A report prepared according to the EU directive may not satisfy local requirements if EEA countries aren’t disclosed on a separate line but on an aggregated level on the rest of world line instead.
Another practical concern could be the language requirement. Besides the different content requirements, jurisdictions such as Germany and France require the report to be prepared in local languages. Therefore, would a report in German or French be accepted in all jurisdictions where a particular group is present? Or does this require the report to be published in several different languages?
Non-EU headquartered multinational groups will need to pay attention to their filing strategy. They have an election to make when it comes to their filing obligations, as opposed to EU-headquartered multinational groups. They need to compare and consider local requirements on content, method of publication or filing, as well as related timelines.
In practice, multinational companies are keen to comply with the regulations; however, local deviations and compliance requirements may create some confusion on the path to more tax transparency.
Important Timelines
The first CbC reports must cover financial years starting on or after June 22, 2024 and be published no later than 12 months after the financial year end. For most multinational groups in scope, where the financial year is equal to the calendar year the first reporting period will start in 2025 with a publication deadline 12 months after the financial year-end, in December 2026.
Some member countries deviate from these timelines. Romanian multinational groups, as well as non-EU headquartered multinational groups with qualifying Romanian presence, were required to file their first report by Dec. 31, 2024 for taxpayers with a reporting year equal to the calendar year.
Romania opted to be a first mover in implementing the EU public CbCR regulations. The Romanian implementation provides two options to publish the report in addition to filing the report in the Romanian public register:
If the report isn’t prepared in Romanian but another official EU language, the website of the ultimate parent undertaking can be used if the report is published in a machine-readable format.
If the report is prepared in Romanian, the website of the Romanian subsidiary can be used if the report is published in a machine-readable format.
Multinational groups not required to publish a report in Romania are now also starting to prepare public CbCR templates based on their latest OECD CbCR, mostly for internal discussions.
Call to Action
Non-EU headquartered groups should pay attention to their filing strategy—where to publish what information, and what choices can be made in local filings. This is part of a larger discussion about tax transparency, and whether a company should be a transparency frontrunner or be more conservative and simply comply with the new minimum standard.
Multinational groups with presence in both the EU and Australia should also pay attention to the Australian public CbCR regulations. Although the Australian initiative has many similarities with EU public CbCR in content and timelines, differences exist that make it difficult to prepare one single public CbCR report that satisfies the various requirements globally.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
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