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EU: Update on country-by-country tax reporting


Bob van der Made

On June 27 2013 the CRD IV Directive (2013/36/EU) was published in the EU's Official Journal. CRD IV introduces new EU rules on bankers' remuneration and bonus caps, capital management and enhanced corporate governance and transparency, including country-by-country tax reporting. CRD IV is the first but it is not the only EU initiative introducing country-by-country reporting for firms. On June 29 2013, the new EU Accounting Directive (2013/34/EU) was also published in the EU's Official Journal. This directive regulates the information provided in the financial statements of all limited liability companies registered in the EEA. It also includes a (non-financial) country-by-country reporting provision. Listed and large non-listed extractive (oil, gas and minerals) and logging companies will need to disclose information on a project-basis on material payments to governments, which will be made publicly available.

To ensure a level playing field within the EU, the draft revised directive on transparency requirements for issuers of securities on regulated markets (Directive 2004/109/EC), known as the Transparency Directive, introduces the same disclosure requirement as the Accounting Directive. This includes all companies listed on EU regulated markets even if they are not registered in the EEA and incorporated in a non-EU country.

The European Parliament adopted its resolution on June 12 2013, signalling negotiations under the EU's Trilogue process. The Council will also need to adopt the compromise text in the coming months.

On May 22 2013, EU leaders issued a broad EU policy orientation on country-by-country reporting which concluded: "… the proposal amending the directives on disclosure of non-financial and diversity information by large companies and groups will be examined notably with a view to ensuring country-by-country reporting by large companies and groups".

At a conference the next day, EU Internal Market and Services Commissioner Michel Barnier said: "The largest banks will also have to disclose their profits, taxes and subsidies in each member state and non-EU country where they operate. And in line with yesterday's conclusion of the European Council we will expand these reporting obligations to large companies and groups."

Extending country-by-country reporting on financial data and taxation to all large companies and groups was not discussed in detail by EU leaders when they met on May 22 2013, however. The vague wording of the conclusion of May 22 2013 by EU leaders, and the political spin put to it by Barnier caused a lot of uncertainty, and may yet signify a political opening for extending country-by-country reporting requirements on financial and tax data to all large companies and groups after all. The Irish EU Council Presidency (which ended on July 1 2013) commented that it had no plans to reopen the EU's Trilogue agreement recently reached on the Accounting and Transparency Directives, and that it had not received any requests from the Commission to that effect.

A number of member states are not opposed to a standalone Commission proposal for a directive to extend country-by-country reporting on financial data and taxation to all large companies and groups. Some think that this is a good idea in the context of BEPS provided that the administrative costs for companies remain limited, proportionate and reasonable, and commercial data can be adequately protected. This route would also entail a detailed Commission economic impact assessment. These member states wish to ensure a due EU decision-making process around further corporate financial and tax reporting, rather than trying to still squeeze this in under the non-financial and diversity paragraphs of the Accounting or Transparency Directives as some member states, the European Parliament and Commissioner Barnier seem to prefer.

Crucial to the debate at EU level will be whether any Commission proposal to extend country-by-country reporting on financial data and tax to all large companies and groups in the EU will be considered as a tax policy measure (requiring EU-28 unanimity in Council) or as an Internal Market-related exchange of information/corporate reporting obligation (requiring a qualified majority in Council and co-decision with the European Parliament). The latter seems more likely.

A preliminary discussion among member states in a formal Council working group meeting was held on this topic under the Lithuanian EU Presidency. It remains to be seen if country-by-country reporting will be proposed as part of the non-financial and diversity paragraphs of the Accounting or Transparency Directives or whether a new proposal for a directive will be launched by the Commission to introduce financial data and tax country-by-country reporting for all large companies and groups.

The new EU rules on country-by-country reporting reflect the EU's commitment to promoting transparency in the context of the G8 activities since May 2011 and a common global reporting standard. Importantly, on June 19 2013, G8 leaders called for the global introduction of financial and tax country-by-country reporting by major multinational enterprises based on a common OECD template to be developed, and taking account of concerns regarding non-cooperative jurisdictions.

Bob van der Made (

PwC EU Direct Tax Group, Brussels and Amsterdam

Tel: +31 88 792 3696


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