• The approved text requires multinationals to publicly disclose in a specific report the income tax they pay.

• Request the Responsible & Transparent Tax Behaviour service to meet the increased expectations of stakeholders.

The Council of the European Union is taking measures to enhance tax transparency of big multinational companies. In February, EU ministers in the Competitiveness Council (COMPET) agreed to move forward with the European public Country-by-Country Reporting directive (CbCR). At the beginning of March, the Portuguese Presidency of the Council of the European Union approved a compromised text. As it is now, the directive would require multinationals with total consolidated revenue of more than €750 million in each of the last two consecutive financial years, to publicly disclose in a specific report the income tax they pay in each member state, together with other relevant tax-related information.

KEY ELEMENTS OF THE CBCR DIRECTIVE

1. The report should be published within 12 months after the drafting of a balance sheet for the financial year.

2. Multinationals would be required to disclose information on:

• The nature of their activities;

• The number of employees;

• The net turnover, including transactions with related parties;

• The profit/loss before tax; corporate income tax accrued;

• The corporate income tax paid;

• Accumulated earnings

3. A company may obtain the deferral of such disclosure for a maximum of six years

NEXT STEPS

The interinstitutional negotiations (the ‘trialogue) are expected to start soon, with the aim to reach an agreement before the end of the Portuguese Presidency in June 2021. If approved, the new rules would apply at the latest from the commencement date of the first financial year beginning on or after one year from the transposition date.

The timeline, however, is subject to change as a result of the trialogue and/or different decisions taken by the Member States regarding the transposition and reporting deadlines.

Corporate tax transparency is here to stay. Companies interested in assessing and improving their tax strategy can request the Responsible & Transparent Tax Behaviour service.

For more information:

Giorgia Miccoli,

Project Manager

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