KPMG report: EU “public” country-by-country reporting and implications for multinational groups

Considerations for multinational entities, adopted from an article produced by the KPMG member firm in Australia

EU “public” country-by-country reporting and implications for multinational groups

Multinational groups with entities or branches in the European Union (EU) would need to publish their country-by-country (CbC) reports under new EU rules. The disclosure requirements for this CbC reporting are not the same as the Organisation for Economic Cooperation and Development (OECD) CbC reporting requirements.

The European Parliament formally adopted the public EU CbC reporting directive on 11 November 2021—the last step in the adoption process. Publication in the official journal is expected shortly, with the directive entering into force 20 days after publication (most likely in December 2021). Read TaxNewsFlash

What does it mean?

Under the measure, qualifying multinational entity (MNE) groups would be required to:

  • File a CbC report on tax and related information concerning the whole group in the relevant EU Member State(s), and
  • Publish a CbC report on their corporate websites

The report would need to include data concerning non-EU- related operations.

KPMG observation 

An important point to note is that while MNE groups with EU operations may already prepare CbC reports (modelled under the OECD BEPS Action 13), these are not made public. The key change is that the CbC reports will be published.

What MNEs would be affected?

An MNE group or standalone entity with:

  • At least €750 million total consolidated group revenue in each of the last two consecutive financial years (different from the non-public CbC rules when the reporting obligation is triggered the first year after the threshold is met); and
  • Either the ultimate parent or a member of the group is an entity or branch in the EU Member State.

For non-EU headquartered companies, the measure is relevant if they exceed the threshold and their EU presence includes either medium-sized or large subsidiaries (as defined in Directive 2013/34/EU) or branches (referred to as "undertakings") that meet the criteria in terms of net turnover.

  • Generally, “large undertakings” means undertakings when two of the three criteria are exceeded:
    • Balance sheet total (generally total assets)—€20 million
    • Net turnover (broadly sales and services income)—€40 million
    • Average number of employees during the financial year—250
  • “Medium undertakings” means undertakings that are not micro or small and which on their balance sheet dates do not exceed the limits of at least two of the three following criteria:
    • Balance sheet total—€20 million
    • Net turnover—€40 million
    • Average number of employees during the financial year—250
  • “Small undertakings” means undertakings that do not exceed the limits of at least two of the three following criteria:
    • Balance sheet total—€4 million
    • Net turnover—€8 million
    • Average number of employees during the financial year—50
  • “Micro undertakings” means undertakings that do not exceed the limits of at least two of the three following criteria:
    • Balance sheet total—€350,000
    • Net turnover—€700,000
    • Average number of employees during the financial year—10

When is it intended to apply from?

Assuming the directive enters into force in December 2021, EU Member States have until June 2023 to implement the directive into domestic law, and the rules would become applicable from June 2024 (i.e., applying with respect to financial years starting on or after this date (note this is a deadline set up by the EU; separate EU Member States may decide to apply the rules sooner)).

What entities are to report?

When the ultimate parent company is based in the EU, the disclosure obligation would be that of the EU parent.

When non-EU parented groups operate in the EU through qualifying subsidiaries or branches, the general rule is that each of the EU subsidiaries and EU branches would be required to publish and make accessible (on their websites or publicly accessible commercial registers) the report on income tax information of their ultimate parent.

EU subsidiaries and branches would be exempt from their obligations if the non-EU parent has published the report on their websites and has assigned one of the EU subsidiaries or branches to file the report with their national trade registry.

What is to be reported?

The report would need to cover specified data for the whole group. The data would be provided:

  • Separately for each EU Member State
  • Separately for each country on the EU list of non-cooperative jurisdictions, or on the “grey list” for two consecutive years
  • Aggregated for the rest of the world

KPMG observation

This is a different basis of preparation to the EU non-public CbC rules that require CbC aggregate data by each tax jurisdiction.

The data would need to consist of a brief description of the nature of the activities; net turnover, including turnover with related parties; profit/loss before income tax; income tax paid and accrued; accumulated earnings; and number of full-time employees.

KPMG observation

Most of these data points are similar to the EU non-public CbC rules (modelled from OECD CbC).

There are some data points—for instance, stated capital and tangible assets—that would not need to be disclosed on a CbC basis.

Certain banks established in the EU generally would be exempt from these new EU public CbC rules if they are covered by a separate reporting directive (Directive 2013/36/EU) specific to banks. Non-EU parented banks operating in the EU, which are not within the scope of Directive 2013/36/EU would have to publish a CbC report if they are within the scope of the new public CbC directive.

Finally, the public CbC report would be produced and published annually within 12 months after the balance sheet date for the relevant financial year of the group.

KPMG observation

MNE groups need to begin considering:

  • Whether the group and EU subsidiaries/branches are in scope
  • How to compare the information requirements based on the public EU CbC and non-public EU CbC (OECD CbC) and any other CbC reporting standards specific to various countries
  • How to determine if current tax reporting systems can be aligned to produce information that complies with all CbC reporting requirements and identify when gaps need to be filled

In certain circumstance the publication of a CbC report could also be a catalyst for MNE groups to revisit their global structures from a tax reputation point of view.

For more information, contact the Global Leader of KPMG’s Global Transfer Pricing Services:

Komal Dhall | +1 212 872 3089 |

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