Country-by-country reports to become public from 2024/2025: the European directive amended
In our earlier newsletter, we wrote that the co-legislators of the European Union agreed in the summer of 2021 that the Country-by-Country Reports, which until now have been a tax secret and should be submitted to the tax authorities of the countries of residency, will become public through an amendment to the relevant European directive (more here)
Following adoption by the European Parliament, the amended text of the European directive on country-by-country reporting entered into force on 1 December 2021 (Directive (EU) 2021/2101 of the European Parliament and of the Council of 24 November 2021 amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches).
The scope of reporting obligation
Pursuant to the amended Directive, ultimate parent undertakings and (sic!) standalone undertakings whose consolidated revenue on their balance sheet date exceeded for each of the last two consecutive financial years a total of EUR 750 million, should draw up, publish and make accessible free of charge a report on income tax information related to the latter of those two consecutive financial years.
Importantly, the requirement does not apply to standalone undertakings or ultimate parent undertakings which, including their branches, are established, or have their fixed places of business or permanent business activity, within the territory of a single Member State and no other tax jurisdiction. Furthermore, the Directive does not apply to banks and operators in the extractive and logging industry, given that the EU has already introduced public country-by-country reporting in these sectors in other directives.
Transposition into national law, reporting commencement date
Member States should transpose the provisions of the Directive into national law by 22 June 2023 at the latest, so that they become applicable from the beginning of the first financial year starting on or after 22 June 2024.
Contents, format and publication of the report
The Directive provides for a complete and final list of information to be disclosed. In an implementing regulation, the Commission should lay down a common template and electronic reporting formats, which should be machine-readable.
The report must be published on the website of the undertaking concerned within 12 months of the balance sheet date of the financial year.
Publishing specific sensitive information
However, the European co-legislators recognise that disclosure of some specific items of information could be seriously prejudicial to the commercial position of the undertakings in scope of the reporting obligation. Under the provisions of the Directive, such information may be omitted. The omission should be clearly indicated in the report together with a duly reasoned explanation regarding the reasons therefor. Yet, any omitted information should be made public in a later report within no more than five years of the date of its original omission.
At the same time, omitting any information related to tax jurisdictions from the EU list of non-cooperative jurisdictions is prohibited.
Collective responsibility for managers
Member States should require the members of the administrative, management and supervisory bodies of reporting undertakings and designated persons to be collectively responsible under national law for ensuring, to the best of their knowledge and ability, that the report is drawn up and published in accordance with the requirements.
The auditor’s report
The company's auditor should check and include in the Auditor's Report whether the company was required to publish the report for the year of the financial statements audited and, if so, whether the report was published in accordance with the requirements.
11 January, 2022.
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Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.
This newsletter provides general information and does not constitute tax advice
