The European Union published new guidance (Directive 2021/2101) on Dec. 1, 2021, that will require European or non-European multinational groups with a total consolidated revenue of 750 million euros or more to publicly disclose certain income tax information on their website for financial years starting on or after June 22, 2024. The new directive amends the guidance in Directive 2013/34/EU, and EU member states have until June 22, 2023, to implement the requirements in domestic legislation.
The directive provides that multinational groups with a total consolidated revenue of €750 million over the last two consecutive financial years are required to make certain tax information public.
In principle, reporting should be done by the ultimate parent. For groups which carry out activities within the EU solely via subsidiaries or branches, the responsibility to publish the information and make it accessible lies with medium-sized and large subsidiaries and medium-sized and large branches as defined in Directive 2013/34/EU. Balance sheet total, net turnover and average number of employees are relevant criteria to determine the size of the undertaking or branch.
If the information is not available or the ultimate parent company does not provide all the required information, the subsidiaries or branches should publish the information that they have, accompanied by a statement specifying that their ultimate parent company has not made the necessary information available.
The required information should be published no later than 12 months after the balance sheet date of the year concerned on the website:
- The ultimate parent company or stand-alone
- The subsidiary or affiliated branch, or
- The branch or the undertaking which opened the branch or an affiliated undertaking
In order to avoid double reporting for the banking sector, the directive does not apply to multinational groups that must disclose a report in accordance Directive 2013/36/EU.
Information to be provided
The information to be disclosed under the directive includes the following:
Disclosure per country or group of countries
- The name of the reporting entity, the financial year in question, the currency used and, where applicable, a list of all the subsidiaries
- A brief description of the nature of the activities
- The number of employees on a full-time equivalent basis
- Revenue which includes:
- The sum of the net turnover, other operating income, income from participating interests excluding dividends received from affiliates, income from other investments and loans forming part of the fixed assets, and any other interest receivable and similar income; or
- The income as defined by or within the meaning of the financial reporting framework on the basis of which financial statements are prepared, excluding value adjustments and dividends received from affiliates
- The amount of profit or loss before income tax
- The amount of income tax accrued during the relevant financial year which is the current tax expense recognized on taxable profits or losses of the financial year in the relevant tax jurisdiction
- The amount of income tax paid on cash basis which is the amount of income tax paid (including withholding tax paid by other undertakings) during the relevant financial year in the relevant tax jurisdiction
- The amount of accumulated earnings at the end of the relevant financial year
- In order to avoid creating an administrative burden, member states shall permit the information listed above to be reported on the basis of the existing reporting instructions that already apply for country-by-country reporting. The information shall be presented using a common template and electronic reporting formats which are machine-readable.
The information must be disclosed on a disaggregated basis -- a country-by-country basis -- for:
- Each member state
- For countries that are mentioned in Annex 1 of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes from their meeting of Oct. 5, 2021 (these countries include American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, U.S. Virgin Islands and Vanuatu)
- For countries that are mentioned in Annex 2 of the Council conclusions, if the country is on the list for two consecutive years (these countries include Botswana, Jordan, Thailand and Turkey)
The information related to other countries may be disclosed on an aggregated basis. When the financial accounts are audited, they should contain a statement by the statutory auditor for the financial year preceding the financial year for which the statements under audit were prepared, whether a public country-by-country report should have been drawn up. The report does not need to be audited.
By June 22, 2023, member states should implement the directive into domestic legislation. The legislation should apply at the latest from the commencement date of the first financial year starting on or after June 22, 2024.
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