EU adopts country-by-country reporting directive
The European Council has adopted a directive on the reporting by multinational companies of tax-related information and exchange of that information between member states, which transposes the OECD’s recommendation on country-by-country reporting (CBCR) into EU law
Companies with a total consolidated group revenue of at least €750m (£570m) will be required to report information on revenues, profits, taxes paid, capital, earnings, tangible assets and the number of employees.
The information must be reported from the 2016 fiscal year onwards, but firms whose parent company is not based in the EU, will have the option to disclose information through ‘secondary reporting’ via its EU subsidiaries from 2016, with the rule becoming mandatory from 2017.
The directive will implement Action 13 from the OECD Base Erosion and Profit Shifting (BEPS) project, on multinational CBCR, into a legally binding EU instrument.
Tax authorities will then be required to exchange these reports automatically, so that tax avoidance risks related to transfer pricing can be assessed.
The Council also agreed to the establishment of an EU list of non-cooperative jurisdictions, on which work will start in September 2016.
In addition, the European Commission will present a proposal at the latest in 2017 for a definitive VAT system for cross-border trade, following on from a special report on VAT fraud. This is likely to include plans for more exchange of information between countries and increased flexibility on VAT rates.
The Council adopted a directive maintaining the minimum standard VAT rate at 15% until the end of 2017, pending discussions on definitive VAT rules.
However, agreement on a draft directive addressing tax avoidance practices commonly used by large companies has been postponed until the Council’s meeting on 17 June 2016.
The draft directive builds on 2015 OECD recommendations to address tax base erosion and profit shifting. It addresses situations where corporate groups take advantage of disparities between national tax systems in order to reduce their tax liability.
Jeroen Dijsselbloem, minister for finance of the Netherlands and president of the Council, said: ‘This directive will enable member states to better respond to aggressive tax avoidance practices, and we are confident that we will obtain an ambitious outcome next month. We had a constructive debate among ministers today, which allowed us to narrow down the number of key issues to be resolved.’
