European Union: European Parliament Extends Scope Of Country-By-Country Reporting

Last Updated: September 4 2017
Article by Neha Rastogi and Nina Krauthamer


With the objective of enhancing transparency and public scrutiny on corporate income tax, the European Commission adopted a proposal1 (the "Proposal") for an amendment to Directive 2013/34/E.U. (the "Accounting Directive") on April 12, 2016. The Proposal, which was intended to implement Action 13 of the O.E.C.D.'s B.E.P.S. Action Plan, required public country-by-country ("CbC") reporting of tax and other financial information by certain undertakings and branches operating in the E.U.2 Since that time, the Committee on Economic and Monetary Affairs and the Committee on Legal Affairs3 (the "Committees") have worked to prepare reports (together, the "Joint Report") on the Proposal, broadening the scope of the measure and increasing reporting requirements. In June 2017, the Committees jointly adopt­ed the Joint Report and submitted it to the European Parliament for approval.

European Parliament Approves Joint Report

On July 4, 2017, the European Parliament, in its plenary session, approved the Joint Report submitted by the Committees.

In addition to CbC reporting by the ultimate parent and its branches, the Joint Re­port requires all subsidiary undertakings that are governed by the national laws of a Member State and controlled by an ultimate parent undertaking that has a con­solidated net turnover exceeding €750 million and is not governed by the laws of a Member State to publish CbC reports on income tax information of that ultimate parent undertaking on an annual basis. The reporting requirement applies whether or not the subsidiaries constitute medium or large subsidiary undertakings referred to in Article 3(3) and (4) of the Accounting Directive.

The Joint Report also introduces a requirement to publish the CbC report in a com­mon template, in an open data format, and in at least one of the official languages of the E.U. It also requires the reporting entity to furnish the following additional details:

  • Name of the ultimate undertaking and, where applicable, a list of all its sub­sidiaries and their respective geographical locations
  • Number of employees on a full-time equivalent basis
  • Fixed assets other than cash or cash equivalents
  • Distinction between the turnover made with related parties and unrelated parties
  • Stated capital

Whether undertakings, subsidiaries, or branches benefit from preferential tax treat­ment resulting from a patent box or equivalent regime

The Proposal required the information to be reported separately for each Member State, and where a Member State comprised of several tax jurisdictions, the infor­mation was required to be combined at Member State level. However, in order to in­crease policy coherence and limit potential tax avoidance, the European Parliament approved an amendment inserted by the Committees that requires the information to be presented separately for each tax jurisdiction in cases where a Member State comprises several tax jurisdictions. The Joint Report also removes the aggregate reporting requirement for all tax jurisdictions outside the E.U. and now requires in­formation separately for each tax jurisdiction.

Recognizing that the disclosure of sensitive information may create a competitive disadvantage, the Joint Report permits the Member State to allow the reporting entity to omit one or more specific items of information from the report if their disclo­sure would be seriously prejudicial to its commercial position. However, the fact of omission shall be indicated in the report together with an explanation for such omis­sion for each tax jurisdiction. The European Parliament has directed the European Commission to form guidelines to assist Member States in defining cases where the publication of information shall be considered seriously prejudicial.

The European Commission is also required to undertake a cost-benefit analysis of lowering the consolidated net turnover threshold beyond which undertakings and branches are required to report on income tax information, i.e., €750 million.

Road Ahead

After approving the Joint Report by 534 votes to 98 with 62 abstentions, the mem­bers of the European Parliament sent the report back to the Committees for inter-in­stitutional negotiations. The Joint Report may be subject to further revisions during the negotiation process, making it difficult to anticipate the final legislation at this time.


1 Proposal for a Directive of the European Parliament and of the Council amend­ing Directive 2013/34/E.U. as regards disclosure of income tax information by certain undertakings and branches

2 The Proposal has been discussed at length in the article "Country-by-Country Reporting: Where Are We Going?," Insights 4 (2016).

3 Both Committees are committees of the European Parliament

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nina Krauthamer
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