The EU is taking action to improve corporate transparency for large multinational companies. The ambassadors of the Member States today tasked the Portuguese Presidency to start negotiations with the European Parliament on the swift adoption of the proposal for a directive on the disclosure of income tax information by certain companies and branches, commonly known as the Public Country By Country Reporting (CBCR) directive.
The directive provides that multinational companies or independent companies with a consolidated total turnover of more than EUR 750 million each in the last two consecutive financial years with their headquarters in the EU or outside the EU publicly announce the income tax they have paid in a specific report give each member state along with other relevant tax information.
Banks are exempt from this policy as they are required to disclose similar information under another policy.
In order to avoid a disproportionate administrative burden on the companies involved and to limit the information disclosed to what is strictly necessary for effective public scrutiny, the Directive provides for a complete and definitive list of the information to be disclosed.
Reporting must be made within 12 months from the date of the balance sheet for the financial year concerned. The policy sets out the conditions under which a company can obtain deferral of such disclosure for a maximum of six years.
It also defines who is actually responsible for compliance with the reporting obligation.
The member states have two years to transpose the directive into national law.
On the basis of the negotiating mandate agreed, the Portuguese Presidency will examine the possibility of reaching an agreement with the European Parliament on the rapid adoption of the Directive at second reading (“Early Second Reading Agreement”).
The proposal for a directive presented in April 2016 is part of the Commission’s action plan for a fairer corporate tax system.
The European Parliament adopted its first reading position on March 27, 2019.