In brief

On 1 June 2021, negotiators for the European Parliament and the Portuguese EU Council  Presidency, on behalf of the Council of the EU (EU-27 Member States), provisionally  reached a compromise deal on the EU's draft Directive on public country-by-country  reporting ('Public CbCR') for big multinational groups, according to a Council of the  EU's press release.

In detail

This political agreement, once endorsed, requires multinational groups or standalone undertakings  with a total consolidated revenue of at least €750m, in that and the previous financial year,  whether headquartered within the European Union or not, to publicly disclose the corporate  income tax they pay in each EU Member State plus in each of the countries that are listed in  Annex I of the EU list of non-cooperative jurisdictions for tax purposes ('the EU's blacklist') or listed  for two consecutive years in Annex II (the 'EU's grey list'). There is a de minimis for groups with  only a small footprint in the EU.

The public disclosures, which also cover income tax accrued, revenues, employees and more,  must follow a common EU template and be presented in a machine readable electronic format.  The reporting is required within 12 months from the date of the balance sheet of the financial year  in question. Based on the Portuguese EU Council Presidency's proposed Council mandate which  was approved by the Member States on 3 March 2021, it would appear that in-scope companies  first need to make a report at the latest in relation to the first financial year starting on or after  at least one year after the transposition deadline, but this will need to be clarified once the draft  political agreement has been published. Per the draft political agreement, EU Member States will  have (up to) eighteen months after the Public CbCR Directive's entry into force to transpose the  Directive into domestic law.

The Public CbCR Directive will set out the conditions under which a company may obtain the  deferral of the disclosure of certain elements for a maximum of five years. It also stipulates who  bears the actual responsibility for ensuring compliance with the reporting obligation. The EU's Council press release states that in order to avoid disproportionate administrative burden  on the companies involved, and to limit the disclosed information to that absolutely necessary to  enable effective public scrutiny, the Public CbCR Directive provides for a complete and final list of  information to be disclosed.

The European Commission will review the application of the Directive four years after the  transposition date.

Next steps

The provisionally agreed text still needs to be endorsed in a final vote in the Council of the EU  on the one hand, by qualified majority, and in the European Parliament on the other, by a simple  majority of members.

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