Political agreement on proposed country-by-country reporting directive

3 June 2021

On 1 June 2020, representatives of the Portuguese presidency of the Council reached political agreement with the European Parliament’s negotiating team on the proposed directive on the disclosure of corporate income tax ("CIT") information by certain undertakings and branches, commonly referred to as the public country-by-country reporting ("CbCR") directive.

On 25 February 2021, internal market and industry ministers held a meeting and showed agreement with EU nations on public CbCR. The Dutch State Secretary of Finance earlier expressed that the Netherlands is in favour of implementing public CbCR obligations to effectively enhance tax transparency. The proposed directive of 1 June 2021 – which has not yet been disclosed – could be considered as a next step towards the obligation for certain multinational enterprises ("MNEs") to publicly disclose CIT information as included in an MNE company's CbCR. The directive will contain a list of the specific items of information that the MNEs will have to disclose.

The agreed text of the draft proposal requires MNEs and standalone undertakings with a total consolidated revenue of more than EUR 750 million in each of the last two consecutive financial years to publicly disclose CIT information regarding each Member State. This applies to MNEs headquartered in the EU, as well as in each third country listed in Annex I of the Council conclusions on the EU list of non-cooperative jurisdictions for tax purposes or listed for two consecutive years in Annex II of these Council conclusions. Qualifying MNEs will have to report the information within 12 months after the end of the respective financial year. The reporting will be done via a standardised EU template and in machine-readable electronic form.

We note that for public CbCR under the draft directive, the revenue threshold requirement is EUR 750 million in each of the last two consecutive financial years which deviates from the current practice. At the moment, MNEs with a total consolidated revenue of more than EUR 750 million in one particular financial year have to prepare a CbCR for the next financial year. Requiring a period of two consecutive financial years for the revenue threshold may somewhat alleviate or postpone the burden to those MNEs who have just met the EUR 750 million threshold for one or the first year.

The text of the proposed directive will now be sent to the Council of the European Union and the European Parliament for formal approval. The EU Member States will have to transpose the directive into national law within 18 months after the adoption.