EU Public Country-by-Country Reporting obligations for EU-headquartered and non-EU-headquartered multinationals from 22 June 2024

Overview of the Directive on EU Public Country-by-Country Reporting

The first legislative proposal for an EU Public CbCR dates back to April 2016. At the time, the Commission presented – in a direct response to BEPS Action 13, which resulted in the OECD globally implementing Country-by-Country Reporting (CbCR) – a draft Directive on EU Public CbCR. At the time, this draft did not receive sufficient political support from the EU member states. During the COVID-19-pandemic, the draft Directive resurfaced and received broad political endorsement.

In December 2021, the EU adopted an amendment to Directive 2013/34/EU to introduce rules regarding the disclosure of income tax information by certain undertakings and branches (Directive (EU) 2021/2101; EU Public CbCR). EU Public CbCR aims to increase transparency and to provide more scrutiny of MNEs' income tax positions and strategies.

EU Public CbCR requires all MNEs with consolidated revenues exceeding EUR 750 million and operations in multiple EU member states to annually disclose certain income tax information on a country-by-country basis to the general public. In-scope MNEs are most EU-parented groups and many non-EU-parented groups. In both cases, data and information needs to be disclosed for defined subsidiaries and branches in the EU and for certain countries outside of the EU (see below). The Directive only requires a disclosure for medium-sized and large subsidiaries and comparable branches (i.e., subsidiaries that, at the balance sheet date, exceed two of the following three criteria):

1. Total assets: EUR 4 million;
2. Net turnover: EUR 8 million;
3. Average number of employees: 50.

The EU Public CbCR dataset must be prepared in a technical format and schema (yet to be defined by the EU) in an official EU language and disclosed in at least one official EU register and on an MNE internet website that is freely accessible to the general public for at least 5 years. A general exemption applies for banks that are already subject to income tax disclose requirements under Article 89 of Directive (EU) 2013/36/EU.

The following information must be disclosed under EU Public CbCR for all fiscal years beginning on or after 22 June 2024 within 12 months after year-end in at least one official EU register and on an MNE internet website:

1. Name of the ultimate parent undertaking or stand-alone undertaking;
2. Nature of activities;
3. Number of full-time equivalents;
4. Revenues;
5. Profit or loss before income tax;
6. Current income tax accrued;
7. Current income tax paid;
8. Accumulated earnings at year-end.

This information must be provided for all in-scope subsidiaries and branches in each EU member state and also for all non-EU jurisdictions that are included on the EU list of non-cooperative jurisdictions (EU blacklist) on a jurisdiction basis. Non-compliance may give rise to a penalty; all member states, who had to transpose the Directive into local law by 22 June 2023, were given the freedom to decide on the type of and the amount of penalties imposed under local law, provided that these penalties are effective, proportionate, and dissuasive.

The new Directive entered into force on 21 December 2021. All EU member states were given 18 months (i.e., until 22 June 2023) to transpose the Directive into local law. EU Public CbCR therefore applies (at the very latest) for all fiscal years beginning on or after 22 June 2024 (with an earlier effective date being possible under local implementation legislation).

For in-scope MNEs who prepare their consolidated financial statements on a calendar-year basis, EU Public CbCR first applies from 1 January 2025. For certain in-scope multinationals with deviating year-ends (e.g., 30 June 2024 or 30 September 2024), EU Public CbCR already applies for the first time from 1 July 2024 or from 1 October 2024.

Overview of the German implementation of EU Public CbCR

On 19 June 2023, Germany published its implementation legislation in the Federal Gazette. After the approval from the Lower House of Parliament on 11 May 2023 and the Upper House of Parliament on 16 June 2023, the law was signed by the President. The legislation requires all in-scope MNEs to disclose defined income tax information on a country-by-country basis to the general public for all fiscal years beginning on or after 22 June 2024. The EU Public CbCR rules have been implemented in line with the requirements set forth in the Directive (Tax@Hand). The implementation has been included in the German Commercial Code (HGB) under Sections 342-342p, which are applicable to all large MNEs.

During the legislative process, the EU Public CbCR rules were significantly tightened in two areas. The period during which confidential information can be excluded from disclosure was reduced from five years to four years, and the maximum fine for non-compliance was increased to EUR 250,000. These changes indicate that strict enforcement can be expected.

Advantages of Germany as a disclosure jurisdiction for non-EU-parented MNEs

EU Public CbCR differs from existing non-public CbCR in terms of content and scope. It only includes EU subsidiaries and branches and certain non-EU subsidiaries and branches in non-cooperative jurisdictions (see above). Furthermore, while CbCR can be filed – and is in practice also filed – by most MNE in their headquarter jurisdiction, EU Public CbCR must be filed and disclosed in the EU in at least one EU public register. For all non-EU-parented MNEs, EU Public CbCR will therefore trigger a new EU disclosure requirement.

This new disclosure should be fulfilled in only one single Member State that allows for an exemption from further local EU disclosures. The non-EU-parented MNE must maintain a qualifying EU subsidiary or a branch in the Member State where the local disclosure is made. The technical format for EU Public CbCR has not yet been published by the EU, but it can be expected that this will be an XML file comparable to the OECD’s technical format for CbCR.

For many non-EU-parented MNEs, Germany might be an ideal jurisdiction to publish their EU Public CbCR dataset. Most non-EU-parented MNEs have subsidiaries in Germany. What also makes Germany attractive is that the local implementation legislation explicitly allows for an election to bridge the (existing) CbCR XML file into the (new) EU Public CbCR data set (Section 342h (4) HGB). In Germany, Deloitte already offers a CbCR outsourcing service for its clients and already supports multiple non-EU-parented MNEs with the conversion of foreign CbCR XML files into the German CbCR XML file (including local e-filing in Germany).

Starting from 2025, Deloitte will extend this existing German outsourcing service to EU Public CbCR and will be able to support all non-EU-parented MNEs with a qualifying German presence with a digital bridge of their OECD CbCR XML file into their EU Public CbCR (XML) data set. This will also include the e-filing in the German official public register (Unternehmensregister) on the basis of a power of attorney to exempt all other EU subsidiaries and branches from local-country EU Public CbCR disclosure and filing requirements.

Action steps for non-EU-parented groups preparing for their first EU Public Country-by-Country Reporting disclosure

EU Public CbCR will increase the administrative burden for all affected MNEs as they will need to disclose detailed income tax information on their company website. This disclosure requirement applies for EU subsidiaries and branches as well as certain other jurisdictions, which is currently not legally required for most MNEs and which is currently also not prepared by most MNEs on a voluntary basis. Affected MNEs should consider supplementing the disclosed data with additional explanations and contextualizing the information to mitigate any potential misinterpretation by the general public. Embedding the new income tax disclosures into an external reporting framework such as ESG, sustainability, or investor reporting, including the Corporate Sustainability Reporting Directive (CSRD), could also be beneficial. OECD CbCR is not only important in the context of EU Public CbCR but might also simplify reporting requirements and minimize tax exposure under the new OECD Pillar Two ruleset (e.g., CbCR-Safe-Harbour).

Support from Deloitte on the EU Public CbCR

Deloitte can provide support and guidance on EU Public CbCR disclosure requirements for non-EU-parented groups. Deloitte can also help you evaluate whether Germany is a suitable jurisdiction for publishing your EU Public CbCR in Germany and can provide an outsourcing service for the conversion of your CbCR XML files into the German CbCR XML file if you choose to use Germany as the central EU disclosure jurisdiction for your EU Public CbCR. Deloitte can also assist with designing external communication strategies and website disclosures for EU Public CbCR.

Please reach out to Deloitte for further assistance and queries related to EU Public CbCR.