In the Action Plan on a Fairer Corporate Tax System issued in March 2015 the European Commission proposed to implement in the European Union (EU) the proposals under Action 13 of the OECD’s action plan on base erosion and profit shifting (BEPS). On 12 April 2016 the European Commission published its proposals on country by country (CbC) reporting by multinational groups operating in the EU.

The EU proposals require multinationals to disclose publicly the income tax they pay together with other relevant tax-related information. Multinationals will need to comply with the proposals if they are doing business in the EU, regardless of whether they are headquartered in the EU or outside. So the same reporting obligations will apply to European businesses and to non-European multinational companies doing business in the European Union.

Multinationals with a worldwide consolidated net turnover of more than EUR 750 million will need to conform to the CbC requirements, this turnover threshold being in line with the OECD CbC reporting recommendations. For multinationals with headquarters in a non-EU country the CbC reporting obligation will fall on its subsidiaries or branches in the EU, unless the non-EU multinational makes its CbC group report publicly accessible and indicates which subsidiary or branch in the EU is responsible for the publication of the report on behalf of the parent company.

The proposals on CbC reporting do not modify the EU rules already in place on non-financial reporting and sectoral CbC reporting for banking and the extractive and logging industries. The proposals include an exemption clause to avoid double reporting for the banking sector as there are already public reporting rules contained in EU banking legislation.

The information to be included in the CbC report should cover the nature of the activities, the number of persons employed, the net turnover (including turnover with related parties), the profit before tax, the amount of income tax due on profits in the country in the current year, the actual payments made to the country’s treasury during the year, and the total amount of accumulated earnings. The information should be given for each EU Member State.

Also because certain third countries refuse to respect good governance standards in taxation the information on operations of multinationals should also be shown with a high level of detail covering those countries. The EU is to draw up a common list of tax jurisdictions on this basis in line with Commission Communication 14 of 28 January 2016, which specified the proposed approach and the criteria to draw up such a list. The EU list will be based on clear criteria and internationally-agreed standards and will be developed by the European Commission and Member States.

The CbC report is to be published in a business register to ensure certainty and availability over time. The CbC reports will also be made accessible to the public on company websites. To allow for comparisons over time the CbC reports should remain accessible on the websites for at least five consecutive years.