In the fight to crack down on corporate tax avoidance, the European Parliament has voted in plenary that multinational companies should disclose tax information in each country they operate. Consequently, multinationals with a worldwide turnover of minimum EUR 750 million should publicly disclose how much tax they pay and where, including taxes paid outside the EU.
Large firms must make information about the tax they pay in each country in the world publicly available by reporting their tax bills on a country-by-country basis – with possible exemptions in the case of commercially-sensitive information – with the aim to increase tax transparency for the public. Under the proposed measures, the income tax information of multinationals would be published in a common template in each jurisdiction in which the firm or its subsidiary was operating. This data will be available for free and made publicly accessible on the website of the firm. The company would also be responsible for filing a report in a public registry managed by the European Commission.
The information to be disclosed would include:
- the name of the firm and, where applicable, the list of all its subsidiaries, a brief description of the nature of their activities and their respective geographical location;
- the number of employees on a full-time equivalent basis;
- the amount of the net turnover;
- stated capital:
- the amount of profit or loss before income tax;
- the amount of income tax paid during the relevant financial year by the firm and its branches resident for tax purposes in the relevant tax jurisdiction;
- the amount of accumulated earnings;
- whether undertakings, subsidiaries or branches benefit from a preferential tax treatment.
The EU Parliament also supports the measures to protect commercially-sensitive information by allowing Member States to grant exemptions from the requirement to provide one or more pieces of information. These exemptions would be renewed annually and would only be applicable in the jurisdiction of the Member State granting the exemption. Once a Member State grants an exemption, it must inform the EU Commission confidentially about the omitted information, together with a detailed explanation for the exemption. Every year, the Commission will publish on its website a list of firms which were granted exemption and a succinct explanation why. However, the EU Parliament has also supported amendments which would set limits on exemptions, e.g. when eligibility for an exemption is lost by a company, the omitted data should be immediately made publicly available. Firms will also have to apply for a renewal of their exemption annually.
The next step – which will take place very likely after the summer – is to further discuss the Commission’s public CbCR proposal by the EU-28 Member States at technical working group level. Based on these proposals, a Council common negotiation position will be prepared by the EU Council Presidency. To agree on the final compromise text, small groups of representatives of the EU Parliament and the Council and the Commission will further negotiate.
For more insights on CbCR and to understand the implications for your organisation, please contact Jonas Van de Gucht.
- Accounting and Tax Compliance
- Base erosion and profit shifting (BEPS)
- Corporate income tax
- International taxation
- Transfer pricing