On 25 February 2021, the Ministers of Internal Market and Industry met virtually to discuss a proposal for Directive on the so-called Public Country-by-Country Reporting. Under this proposal, revived under the current Portuguese Presidency of the Council of the European Union, multinational enterprises with consolidated revenue of more than 750 million euro during the last two consecutive years would be obliged to publish certain tax related information on their websites such as:
- the name of the ultimate parent undertaking or the standalone undertaking, financial year concerned and the currency used;
- a brief description of the nature of the activities;
- the number of employees which is the average number of employees during the financial year;
- the revenues (including from related party transactions) which are:
- the sum of the net turnover, other operating income, income from participating interests, excluding dividends received from affiliated undertakings, income from other investments and loans forming part of the fixed assets, other interest receivable and similar income as listed in Annexes V and VI of this Directive, 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 affiliated undertakings;
- 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 recognised on taxable profits or losses of the financial year by undertakings and branches in the relevant tax jurisdiction;
- the amount of income tax paid on cash basis which is the amount of income tax paid during the relevant financial year by undertakings and branches in the relevant tax jurisdiction; and
- the amount of accumulated earnings at the end of the relevant financial year.
Although there is still some discussion on the legal instrument that can be used, the European Commission is considering that the proposal relates to transparency measures and not to tax matters. In that case a qualified majority would be sufficient and no consensus between the Member States would be needed. During the meeting, the Chair noted broad majority support as well as strong political support for the proposal.
The proposal will be forwarded to the Committee of Permanent Representatives (COREPER) and then to the European Parliament to start the triumvirate discussions between the EP, the Council and the European Commission. It can be expected that Portuguese presidency will move quickly with this proposal in order to have an agreement before the end of its presidency (end of June 2021).
We have a dedicated team of transfer pricing specialists within PwC Belgium ready to assist you. Do reach out to us for further technical insights and assistance on how public country-by-country reporting may apply to your business.