Background

As discussed in our briefing earlier this year, proposals for an EU directive requiring country-by-country reporting of financial and tax information of certain multinational groups or standalone entities to be made publicly available were agreed.  The EU published its directive[1] (“the Directive”) on 1 December 2021 which must be transposed into the national law of EU Member States by 22 June 2023.
While large multinational groups have been required to file a country-by-country report with tax authorities in the EU since 2016, the new directive will require country-by-country financial and tax information to be made publicly available. For many groups there may not be a significant additional compliance burden over and above the requirement to prepare the existing country-by-country report but the fact that the report will be publicly available is of note.

Scope

The reporting requirement will apply to both EU-based and foreign enterprises, which are active in an EU Member State and at least one other tax jurisdiction, with a global consolidated revenue of more than €750m as reflected in its consolidated financial statements in each of the last two consecutive financial years.
Where the ultimate parent is outside the EU, a medium or large subsidiary[2] in the EU (and in certain circumstances a branch in the EU), will be required to publish their parent’s report if it can obtain the information. Where it cannot obtain the information it should explain the reasons for the omission. Alternatively, the non-EU ultimate parent will have the option to publish the required information.
If a subsidiary or branch of a non-EU headquartered company exceeds a revenue of €750m for each of the last two consecutive financial years, it will be subject to individual reporting requirements.
Statutory auditors will be required to confirm whether a company falls within the scope of the rules and, if so, whether the report was published in accordance with the provisions of the Directive.

Reporting

The reporting entity will be required to publish and make accessible its report on its website, using a common template, in a machine-readable format. Alternatively, the information may be published on the EU Member State’s central register, commercial register or companies register.
The country-by-country report for an accounting period will be due within 12 months of the balance sheet date of that financial year.
The report must include information relating to all the activities of the standalone undertaking or ultimate parent undertaking, including those of all affiliated undertakings consolidated in the financial statements in respect of the relevant financial year.
The information to be reported will include:

• name of the relevant undertaking, the financial year concerned and the currency used;
• where applicable, a list of all subsidiary undertakings in the EU and subsidiaries listed on the EU blacklist or grey list (see below for details);
• the nature of the company’s activities;
• the number of full-time employees;
• revenue which will exclude dividends from affiliated undertakings;
• the amount of profit or loss before income tax;
• the amount of income tax accrued for the year;
• the amount of income tax paid; and
• accumulated earnings.

Companies which come within the scope of the Directive will have to publicly disclose this information separately for each EU Member State in which they operate, as well as any non-EU Member States included in the EU list of non-cooperative jurisdictions, known as the EU “blacklist”, and those countries that have been included for two consecutive years in the EU “grey list”. The report should present the information on an aggregated basis for any other jurisdictions.
The EU lists were updated in October 2021 and currently include the following countries:

EU blacklist	EU grey list
American Samoa	Anguilla
Fiji	Barbados
Guam	Botswana
Palau	Costa Rica
Panama	Dominica
Samoa	Hong Kong
Trinidad and Tobago	Jamaica
US Virgin Islands	Jordan
Vanuatu	Malaysia
	North Macedonia
	Qatar
	Seychelles
	Thailand
	Turkey
	Uruguay

Companies may be able to defer disclosing one or more specific items of information for five years, provided they clearly disclose the deferral and give a reasoned explanation for it in the report. This deferral is expected to apply where the disclosure of such information would be seriously prejudicial to the commercial position of a company. This deferral option will not apply to information in respect of jurisdictions included on the EU blacklist or grey list.

Next steps

EU Member States will be required to transpose the Directive into national law by 22 June 2023 which should provide that the reporting requirement will apply at the latest for all financial years starting on or after 22 June 2024.
Ireland has recently commenced a public consultation on two policy options available to Ireland on transposition of the directive as follows:

• Whether Ireland should take the option to allow for one or more specific items of information, otherwise required to be disclosed to be temporarily omitted from the report, when their disclosure would be seriously prejudicial to the position of the undertakings to which it relates?
• Whether Ireland should exempt undertakings from the publishing requirement, if the report is simultaneously made accessible to the public in an electronic reporting format which is machine readable, on the website of the Companies Registration Office (CRO), and free of charge to any third party located in the European Union?

The Arthur Cox LLP Tax Team will make a submission to this consultation which closes on 18 February 2022.
If you have any queries or would like to discuss this topic, please contact a member of the Arthur Cox LLP Tax Team.