Corporate Tax

EU introduces public country-specific reporting to stop corporate tax avoidance – MNU Tax

By Doug Connolly, MNE Tax

The new EU requirement for multinational companies to disclose the amount of taxes they pay in each EU country will come into effect on November 11th after approval by the European Parliament.

Multinational companies must start complying with the regulations from 2024. The EU member states have 18 months to transpose the directive into national law after its entry into force, which will take place 20 days after its publication.

“Today’s adoption is a long-awaited step in increasing corporate transparency and setting a precedent for the world,” said Spanish MP Ibán García del Blanco. “The EU must put an end to the secrecy of where and how large multinational corporations do business and how much taxes they pay in each country.”

The European Council presented the proposal for a directive in September after provisional agreement on the directive had been reached with Parliament in June. Efforts to adopt a public country-specific measure had been in progress since 2015.

The new requirement applies to multinational companies and their subsidiaries that have annual sales in excess of EUR 750 million (approx. USD 860 million) and operate in more than one EU country. Companies covered by the scope are required to provide information on the amount of taxes they pay in each EU country, as well as in countries that are on the EU black and gray lists.

In addition to taxes paid, companies are required to disclose information about the nature of their activities, the number of employees per country, and their pre-tax profits / losses. The information should be made publicly available online in standardized formats.

Companies are allowed to aggregate information for countries that are neither in the EU nor on the EU black and gray lists.

Protective measures will apply the reporting requirement to multinational group companies and branches below the reporting threshold if it is found that the companies are being used to circumvent the reporting requirement.

Doug Connolly is the Editor-in-Chief of MNE Tax. He has more than 10 years of experience in tax law developments and previously worked for both a Big Four law firm and a leading legal publisher. He holds a law degree from the American University’s Washington College of Law.

Doug Connolly

Doug Connolly

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