Public Country-by-Country Reporting Proposal

On February 25, 2021, the EU Member States’ internal market and industry ministers exchanged views on the proposed Public Country-by-Country Reporting initiative. Following on that, the members of the Council and the European Parliament approved on March 3 and March 4, 2021 respectively, mandates for their respective negotiating positions in anticipation of the start of interinstitutional negotiations (so-called “trilogue”) on the public Country-by-Country Reporting proposal. Negotiations are expected to begin shortly, with the aim to reach agreement on the directive at second reading ("early second reading agreement"), before the end of the Portuguese Presidency (30 June 2021).

Currently, Country by Country (CbC) Reporting is limited to the annual filing by multinational enterprises with the tax authorities of a comprehensive group tax report to cover every jurisdiction where they do business. The report is designed to show global tax information of the multinational group and of its constituent member entities. CbC Reporting, in this form, was introduced to Malta by L.N 400 of 2016, applicable from fiscal years commencing on or after 1 January 2016.

Public CbC goes a step further – the multinational entities headquartered in the EU with a total consolidated group revenue of at least EUR750 million would be required to publish a ‘report on income tax information’. Such report, which must be accessible by the public to enable public scrutiny, includes key information ultimately showing where they make their profits and where and how much tax they pay in the EU on a country-by-country basis. For non-EU jurisdictions, the information would need to be prepared on an aggregated basis. Yet, for tax jurisdictions listed in the EU list of non-cooperative jurisdictions, the information would need to be disclosed on a country-by-country basis.

Whilst there are differences between the European Parliament’s and the Council’s negotiating positions, official statements made by the representatives of each of the two institutions suggest that both parties are committed to starting the trilogue process and swiftly reaching an agreement in the first half of 2021. Once a provisional agreement is reached based on trilogue meetings, the act could be adopted under the “early second-reading agreement”, under which the Parliament approves without amending the Council's position at first reading.

Should you have any queries, please do not hesitate to contact us directly.

Should you wish to learn more about this development, we invite you to have a read through Euro Tax Flash 443 and 444 from KPMG’s EU Tax Centre.