European Commission proposes country-by-country tax reporting rules

The European Commission on Tuesday issued proposed rules that would require multinational companies operating in the EU to report information on where they make their profits and where they pay tax. The proposal implements the country-by-country reporting rules proposed by the Organisation for Economic Co-operation and Development’s Action Plan on Base Erosion and Profit Shifting, which has been endorsed by the G20 countries.

The new rules would apply to multinational corporations operating in the EU that have global annual revenues of more than €750 million. The rules would apply to any multinationals doing business in the EU, whether or not they are based in the EU. In addition to country-by-country reporting of European activities, companies would also be required to publish aggregate figures for activities outside the EU.

The proposal would amend EU Accounting Directive 2013/34/EU to require affected companies to annually publish a report disclosing their profits before tax and taxes accrued and paid, as well as number of employees, net turnover, and the nature of their activities in each EU member state. The European Commission, in announcing the proposal, says that “[t]he proposal has been carefully calibrated to ensure that no confidential business information would be published.”

Tuesday’s proposal dovetails with proposed amendments to Administrative Cooperation Council Directive 2011/16/EU, which were issued in January (2016/0010 (CNS) (January 28th 2016)). The January proposal would implement mandatory automatic exchange of information gathered by the country-by-country reports.

The proposal will now be submitted to the European Parliament and Council of the EU for consideration.

—Alistair Nevius (anevius@aicpa.org) is CGMA Magazine’s editor-in-chief, tax.