Loyens & Loeff New York regularly posts 'Snippets' on a range of EU tax and legal topics. The topic of this Snippet is the EU public country-by-country reporting directive (the '𝐃𝐢𝐫𝐞𝐜𝐭𝐢𝐯𝐞'). The Directive became effective on January 1, 2025 for in-scope US multinational groups ('𝐌𝐍𝐄𝐬') with a book year equal to the calendar year.
Currently, 'non-public' country-by-country reporting
('𝐍𝐨𝐧-𝐏𝐮𝐛𝐥𝐢𝐜
𝐂𝐛𝐂𝐑') already exists in many
jurisdictions. In the EU, Non-Public CbCR requires MNEs with a
consolidated turnover of at least EUR 750 million (the
'𝐂𝐛𝐂
𝐑𝐞𝐯𝐞𝐧𝐮𝐞
𝐓𝐡𝐫𝐞𝐬𝐡𝐨𝐥𝐝')
to prepare and submit a report that includes certain data points to
help tax authorities assess transfer pricing risks. Those reports
are automatically exchanged among EU Member States
('𝐌𝐒').
The Directive requires MNEs to publicly disclose certain
information (including income tax paid) in (i) each EU MS, (ii)
each jurisdiction that is on the EU black or grey list on relevant
dates and (iii) all other jurisdictions on an aggregated basis. The
goal of Public CbCR is to enhance public scrutiny of income taxes
borne by MNEs with activities in the EU, whereas Non-Public CbCR
seeks to combat tax avoidance.
Public CbCR applies to MNEs that meet the CbC Revenue Threshold in
two consecutive years and are EU headquartered or non-EU
headquartered with one or more EU subsidiaries or branches. An
exception is provided for "small" EU subsidiaries and
branches. For subsidiaries, this exception generally applies if
they do not exceed at least two of the three following criteria in
two consecutive years: a balance sheet total of EUR 4 million, a
net turnover of EUR 8 million and 50 employees. US MNEs with
(material) active EU operations will thus likely become subject to
Public CbCR, but this may be different for US MNEs whose EU
subsidiaries have a holding function only.
Pursuant to the Directive, 2025 is the first reporting year for
MNEs that apply a financial year that equals the calendar year.
Publication must occur within 12 months after the end of a
reporting year, and the report must be published in the relevant EU
business register(s) and on the relevant corporate website(s) of
the MNEs. The Directive allows disclosure deferral for commercially
sensitive information. EU MS may implement the Directive more
strictly or sooner (e.g., Romania applies 2023 as first reporting
year).
It is important for US MNEs with EU presence to verify whether they
may face Public CbCR in the EU. Also, it's recommended to
assess Public CbCR in the context of broader tax transparency
policies and to ensure that the information disclosed under Public
CbCR aligns with other information, such as Non-Public CbCR and
Pillar 2 reporting.
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.
