Public Country-by-Country – FAQ

Could MNEs that already prepare CbyC reports under BEPS Action 13 make public these reports to meet the disclosure requirements under the EU Public CbyC Reporting Directive?

As a general comment, in-scope MNEs should not assume that they will be able to simply make public the same data disclosed under the non-public CbyC reporting requirements.

By making the disclosure public, the EU has pivoted away from what had been the original OECD architecture and concept. There are several key differences between the respective disclosures required under the two sets of rules, including:

• Data points. Whilst most of the data points to be reported under the EU public CbyC rules are similar to those required under the EU non-public CbyC rules (modelled based on BEPS Action 13), there are also several differences. For instance, stated capital and tangible assets do not need to be presented under the EU public disclosures.
• Data aggregation. Under BEPS Action 13, MNEs are required to disclose CbyC aggregate data by each tax jurisdiction. On the other hand, the EU Public CbyC Reporting Directive has different aggregation requirements - i.e. separately for each EU Member State and for countries listed on the EU list of non-cooperative jurisdictions for tax purposes, as well as for countries that have been on the so-called “grey list” for at least two years, but aggregated for the rest of the world.
• Presentation of “stateless entities”. This point is relevant for MNEs that have tax transparent entities in the group structure, such as partnerships. Under the non-public CbyC rules, if a partnership is not tax resident in any jurisdiction, then the partnership’s data points, to the extent they are not attributable to a permanent establishment, should be reported as “stateless”. Any partners that are also Constituent Entities within the MNE are required to include their share of the partnership’s items in the jurisdiction where they are tax resident. This approach results in a double counting of revenues and profits under non-public CbyC rules, at the partner and stateless level. On the other hand, the “stateless” concept does not appear in the EU Public CbyC Reporting Directive, which requires the data points to be allocated to only one jurisdiction. Accordingly, some additional analysis of stateless entities is required when presenting the data on the EU public CbyC reports.

It is worth noting that Member States are also required under the EU Public CbyC Reporting Directive to allow in-scope MNEs to disclose the various data points on the basis of the reporting instructions issued for the non-public CbyC reports . The information should be presented using a common template and electronic reporting formats which are machine-readable and which will be developed by the European Commission. However, it is unclear at this stage whether the templates will be accompanied by additional instructions to clarify reporting where the two sets of rules differ, as highlighted above.

In order to prepare for public reporting, MNEs would need to determine if current tax reporting systems can be aligned to produce information that complies with both non-public and public CbyC reporting requirements and identify any gaps that need to be addressed.

Lastly, the two reports have substantially different audiences. MNEs should carefully consider whether to include narrative related to the information disclosed, as well as potentially explaining the differences between their non-public and public CbyC numbers (if any). MNEs active in capital-intensive industries, such as manufacturing, real estate, automotive, extractive industries, might also consider publicly disclosing the assets held in each jurisdiction, even if not required under the new EU rules.

For many MNEs, the publication of a public CbyC report will represent a first step in a broader tax transparency project that goes beyond the requirements of the EU rules and presents the group’s broader tax footprint.

Please note the table above includes only key differences – for a more comprehensive comparison please refer to this overview available (PDF 537 KB) on our website

Are we likely to see differences in the way that public CbyC reporting is enacted by EU Member States?

Member States are left with a number of choices with respect to domestic implementation of the EU Public CbyC Reporting Directive:

• use of the so-called “safeguard clause”: Member States can choose to allow in-scope MNEs to defer the disclosure of commercially sensitive information for a maximum of five years – with the exception of data related to jurisdictions on the EU list of non-cooperative jurisdictions (Annexes I and II);
• website publication exemption: Member States may opt to exempt companies from publishing the report on their websites, if the report is already made publicly available to any third party located in the EU, free of charge, on the website of a commercial registry.

The EU Public CbyC Reporting Directive is a minimum standard – Member States may therefore expand the scope of the rules by, for example, requiring additional data points. As an example, based on a draft bill that aims to implement the EU Public CbyC Reporting Directive into local law, Hungary intends to require MNEs in scope to explain the reasons behind any significant differences between the income tax accrued and income tax paid (if such significant differences exist). The inclusion of this type of narrative is an option allowed to disclosing entities under the EU Public CbyC Reporting Directive, but it may be introduced as a requirement under Hungarian law.

Individual Member States can opt for an earlier transposition and shorter reporting deadlines. For example, the law transposing the EU Public CbyC Reporting Directive in Spain sets the reporting deadline at six months after the end of the balance sheet date (as opposed to the 12 months under the EU Public CbyC Reporting Directive).

These different options and potential scope extensions will impact in particular non-EU headquartered groups, which generally have reporting obligations in each EU country where they have a qualifying presence. Such MNEs therefore need to consider how to achieve consistent disclosures that meet the requirements of each of the countries where they have an obligation and should monitor developments in each EU jurisdiction.

Will public reporting impact MNEs’ approach to tax transparency?

Many MNEs have already started taking steps towards tax transparency by publishing tax footprint reports or by preparing their Action 13 report with a view that the data may become public.

However, the EU public CbyC reporting requirements as well as upcoming requirements in other parts of the world, such as Australia, will change the stakes for many MNEs: it is time to reconsider the robustness of data and data collecting processes. MNEs need to ensure they have confidence in the data that will be made available to the public and that the information published is an accurate representation of the group’s tax footprint.

In this context, MNEs may also want to consider the narrative that will accompany these reports, if any. The broader audience, i.e. the general public rather than just the tax authorities, will have different levels of understanding of tax numbers and of how they (should) relate to the other data points reported. In-scope MNEs should therefore consider adding extra data points, as well as additional facts and considerations that would help paint the full picture of the group’s operations in a non-technical way. 

Is there any limitation on how disclosed information can be used by stakeholders?

The EU Public CbyC Reporting Directive does not include any limitations to how the data in the public CbyC reports can be used. The requirement is for the information to be made available free of charge to the public.

It should therefore be expected that stakeholders will make use of the data, possibly in conjunction with any other information published by in-scope MNEs (such as financial statements) in an attempt to understand the group’s operations and approach to its tax affairs. Data may also be used for the purposes of benchmarking against other MNEs, e.g. by data point or by industry.

For example, both the EU Tax Observatory and Transparency International present on their respective website the information made publicly available by banks as part of their CRD IV reporting.

Moreover, the FAQ released by the Commission in 2016 when the proposal for the EU Public CbyC Reporting Directive was published, states that the intention behind making this information public is to allow the public to scrutinize the tax strategies of MNEs. The Commission also confirms the initiative aims to enable citizens to have detailed insight regarding whether MNEs pay taxes in the country where profits are generated and assess whether significant profits have been shifted outside the EU.

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The banking industry is already subject to certain country-by-country disclosure requirements under the CRD IV. Are banks still required to report under the EU Public CbyC Reporting Directive?

The EU Public CbyC Reporting Directive includes a provision aimed at avoiding double reporting for the banking sector. Ultimate parent companies and standalone entities subject to CRD IV are exempted from the scope of the EU public CbyC Reporting rules provided that the report made public based on CRD IV covers all activities performed by the entity and by the affiliated companies included in their consolidated financial statements.

EU-headquartered banking groups are already within the scope of CRD IV and would be exempted from the EU public CbyC Reporting rules provided their existing disclosure covers all the entities included in their consolidated financial statements. MNEs that include entities that are in scope of CRD IV should consider whether they can avail themselves of the exemption.

However, non-EU headquartered banks operating in the EU would not benefit from the exemption. Non-EU headquartered companies are brought in the scope of the rules by Article 48 b), paragraphs (5) and (6), which do not prescribe any exception for the banking sector. Moreover, the FAQ released by the Commission in 2016 – when the proposal for the EU Public CbyC Reporting Directive was initially published, states the Commission’s intention of bringing non-EU headquartered banks in the scope of the rules.

MNEs active in the extractive industry are required to prepare and make public a report on payments made to governments on an annual basis, under the EU Accounting Directive. Are these entities still required to report under the EU Public CbyC Reporting Directive?

The EU Public CbyC Reporting Directive does not provide for an exemption for entities that are subject to the reporting requirements under Chapter 10 of the EU Accounting Directive (extractive industry). The data points to be disclosed under the Chapter 10 rules are different and less extensive as compared to the EU Public CbyC Reporting Directive, and this fact could potentially explain the reason behind not benefiting from a disclosure exemption.

Is the scope of the EU public CbyC Reporting requirements the same as for BEPS Action 13 reports?

No – a group that meets the requirements to report under the EU non-public CbyC Reporting rules would not always be subject to EU public CbyC reporting. As opposed to the non-public CbyC rules, under which a group only needs to consider prior year revenues to determine whether it is in scope, the EU Public CbyC Reporting Directive tests two prior years.

For example, a calendar year-end MNE would have a reporting requirement under the EU public CbyC rules in 2026 with respect to financial year 2025 (i.e., 12 months after the end of the reporting period) if it exceeds the EUR 750 million threshold for the reportable year (2025) as well as for the previous financial year (2024).

Similarly, if we consider the case of an MNE group that was previously not in the scope of the EU Public CbyC rules and that exceeds the EUR 750 million threshold in FY2026 and in FY2027, the disclosing entity will have to prepare the first report with respect to FY2027⁷ . The publication deadline would be 12 months after the end of the balance sheet date of FY2027 (i.e. end of FY2028 for calendar year-end taxpayers).

Is the assessment of the EUR 750 million threshold consistent across the EU?

The size threshold for the group is not assessed based on the euro amount in all Member States, because not all 27 EU jurisdictions use the euro as their local currency.
For EU-headquartered MNEs, the EU Public CbyC Reporting Directive prescribes that Member States that have not adopted the euro as currency may convert the threshold of EUR 750 million in local currency using the exchange rate published in the Official Journal of the EU as at December 21, 2021. Member States are also allowed to increase or decrease the threshold by up to 5 percent in order to produce a round sum in the national currencies.

For non-EU headquartered MNEs, Member States are required to convert the threshold to an equivalent amount in the national currency of any relevant third countries by applying the exchange rate as at December 21, 2021, rounded off to the nearest thousand.

The thresholds will therefore be stable within each Member State but will not be the same across the EU.

For instance, under the bill implementing the EU Public CbyC Reporting Directive into Romanian legislation, a US-headquartered MNE would have to consider a threshold of approximately USD 846 million (computed by converting RON 3,700 million to USD using the RON / USD exchange rate as at December 21, 2021).

When does a group fall outside the scope of the public reporting rules?

Under the EU public CbyC rules, MNEs are no longer subject to disclosure requirements where the total revenue falls below EUR 750 million for each of the last two consecutive financial years. In such cases, the group remains subject to the reporting disclosures with respect to the first financial year subsequent to the last financial year when its revenues exceeded the relevant amount.

For example, where the revenue of a multinational group is:’

• EUR 800 million in FY2025 and in FY2026,
• EUR 720 million in FY2027 and
• EUR 700 million in FY2028,

the disclosing entity would have to prepare a report for both FY2026 and FY2027 and would only fall out of scope starting with FY2028.

Based on the text of the EU Public CbyC Directive, the publication deadline would be 12 months after the end of the balance sheet date of FY2027 (i.e. end of FY2028 for calendar year-end taxpayers). As noted above, EU Member States could impose earlier reporting deadlines

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Is the assessment of the thresholds for medium-sized and large subsidiaries and branches of non-EU headquartered groups consistent across the EU?

The EU Public CbyC Reporting Directive defines medium-sized or large subsidiaries in accordance with Article 3 of the EU Accounting Directive. To qualify as a medium size or large company, the entity needs to meet two of the following three conditions:

• a balance sheet greater than EUR 4 million;
• net turnover greater than EUR 8 million; or
• an average number of employees exceeding 50.

In the case of branches, only the net turnover is relevant.

Member States are nevertheless allowed to increase the thresholds as follows:

• up to EUR 6 million for the balance sheet total, and
• EUR 12 million for the net turnover.

Please also note that the thresholds above are periodically updated to keep pace with inflation.

Member States that have not adopted the euro have to convert the thresholds in local currency using the exchange rate published in the Official Journal of the European Union as at the date of the entry into force of any Directive setting those amounts. These Member States are allowed to increase or decrease the euro amounts by a maximum of 5 percent in order to produce round sum amounts in the national currencies.

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What is a commercial register? Is it the same register as the one used for filing statutory accounts for resident companies?

The publication requirements are based on those applicable to the financial statements (as well as other publicly disclosable documents)⁸.

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What is the EU list of non-cooperative jurisdictions mentioned in the EU Public CbyC Reporting Directive and how often is it updated?

The EU list of non-cooperative jurisdictions for tax purposes (EU List) was created as part of the EU’s efforts to fight tax evasion and avoidance. The EU List was introduced to improve tax good governance globally and is based on an assessment of non-EU countries against a set of EU criteria that are aimed at reflecting tax transparency, fair taxation, the implementation of OECD’s BEPS measures and substance requirements for zero-tax countries.

The EU List is published as an annex to conclusions adopted by the Economic and Financial Affairs Council configuration (ECOFIN) (Annex I) and includes jurisdictions that failed to fulfil their commitments to comply with the EU’s criteria within a specific timeframe. Jurisdictions that do not yet meet these standards but that have committed to implementing adequate reforms are listed in a state of play document (Annex II or the so-called “grey list”).

The EU List and the grey list are updated in February and October of each year.

Assuming a non-EU headquartered MNE with qualifying operations in multiple EU jurisdictions designates a single subsidiary to file and publish the public CbyC report for the group. Should the CbyC report be drawn up in accordance with the requirements in the Member States where the designed subsidiary is established?

The EU Public CbyC Reporting Directive does not provide for priority rules when Member States make use of different options or expand its scope. As it stands, and in the absence of specific implementation guidance from individual Member States, the choice for one jurisdiction to give, for example, the option of a deferral of publication of certain data does not bind other EU jurisdictions. Therefore, non-EU MNEs will have to monitor how each Member State implements the EU Public CbyC Reporting Directive and ensure that the report they submit meets the requirements of each Member State in which they have a reporting obligation, irrespective of where the filing entity is based.

Consider, for example, the case of a US-headquartered MNE that exceeds the revenue threshold under the EU Public CbyC Reporting Directive and that operates through qualifying subsidiaries in Germany, Hungary and Spain. The MNE would have to consider the following:

Hungary: based on the draft bill published in 2022, Hungary does not intend to apply the safeguard clause (based on which commercially sensitive information can be omitted for a period of maximum 5 years). Hungary also intends to extend the scope of the EU Public CbyC Reporting Directive by requiring MNEs to explain differences between taxes accrued and taxes paid (the EU Public CbyC Reporting Directive includes this as an optional disclosure). The draft bill exempts non-EU MNEs from the disclosure requirements in Hungary if the public CbyC report is published by the parent and by another EU subsidiary, provided that the content of the report is prepared in line with the Hungarian rules.

As a result, based on the wording used by the draft Hungarian bill, if the non-EU parent assigns the German subsidiary to comply with the EU public CbyC Reporting requirements, the report would have to include the information required in Hungary, i.e., including the additional narrative, as well as information that may otherwise be considered commercially sensitive, in order for the reporting obligation to be met and for the exemption from local publication to apply. This would be the case despite the fact that Germany intends to make use of the safeguard clause and does not require an explanation for differences between taxes accrued and taxes paid.

Similarly, the deadline to file and publish CbyC reports in Spain is six months after the balance sheet date (compared to 12 months as outlined by the EU Public CbyC Reporting Directive). Although it is unclear at this stage how this requirement would apply when the reporting obligation is met through a report submitted in another Member State, in practice, this rule might mean that the German subsidiary designated to comply with the MNE’s obligations in the EU would need to comply with the Spanish deadline (despite Germany applying a filing timeline in line with the EU Public CbyC Reporting Directive).

Are there any audit and / or assurance requirements?

Under the EU Public CbyC Reporting Directive, there is a mandatory requirement for auditors to check and state whether a company falls within scope and whether the public CbyC report was published. However, the auditor will not be required to provide assurance on the content of the report.

The requirement is a compromise between the Council’s position (whereby the audit requirement was an optional provision that Member States could implement but were not required to do so) and the Parliament’s proposal to also require a statement on the content of the report.

It is, however, possible that some MNEs would seek additional assurance before releasing the report to the public as part of their internal governance and control processes.

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For more insights into the EU Public CbyC Reporting Directive as well as other, related, initiatives, please refer to the dedicated
EU Public CbyC Reporting landing page.

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