The EU's public country-by-country reporting directive is now in effect

Executive summary

The European Union (“EU”) has introduced new public country by country reporting (“CbCR”) requirements for the first financial year starting on or after June 22, 2024 for multinational groups that are either EU-parented or, if not EU-parented, have an EU subsidiary or branch of a certain size.

New EU country by country reporting requirements are now in effect and they will require certain multinational groups to disclose key financial information to the public. We address key questions below.

I. Who does the directive apply to, and for which tax periods do the new public CbCR rules apply?

The directive requires a multinational group with total consolidated revenues exceeding EUR 750 million in each of the last two consecutive financial years to report under the new public CbCR rules if: (i) the group is EU-parented; or (ii) if not EU-parented, the group operates in the EU through a qualifying subsidiary (i.e., a subsidiary that meets two of the following three criteria: (1) total assets greater than EUR 4 million; (2) revenue greater than EUR 8 million; or (3) average number of employees greater than 50) or a branch (i.e., revenue of at least EUR 8 million for each of last two consecutive financial years).

The rules will apply from the commencement date of the first financial year starting on or after June 22, 2024. Thus, for calendar year taxpayers, the first reporting year will be financial year 2025.

The report should be published annually within 12 months after year end. For calendar year taxpayers, the first report will be due by the end of December 2026.

It should be noted that EU member states have the option to impose earlier reporting deadlines – certain member states, for example, have imposed earlier submission deadlines and others have applied the rules for financial years starting on or after dates that are earlier than June 22, 2024.

II. What information needs to be reported to satisfy the public CbCR requirements?

The directive requires all members of the group (including non-EU members) to report the following information:

1. Brief description of the nature of the activities;
2. Number of full-time equivalent employees;
3. Revenue (including related party revenue);
4. Profit or loss before income taxes;
5. Income tax accrued (current year);
6. Income tax paid (cash basis); and
7. Amount of accumulated earnings.

The data should be provided on the following basis: (i) separately for each EU member state; (ii) separately for each jurisdiction included on the EU list of non-cooperative jurisdictions or on the “grey list” for two consecutive years; and (iii) aggregated for the rest of the world.

III. Who is responsible for filing the report?

For EU-parented multinational subsidiaries, the disclosure obligation lies with the EU parent.

For non-EU-parented multinational enterprises, each qualifying EU subsidiary and EU Branch is required to disclose information for the in-scope group. It should be noted that such EU subsidiaries/branches are exempt from their reporting obligations if the non-EU parent has published the report on its website and has assigned one of the EU subsidiaries or branches to file the report with their national commercial registry.

IV. Where should the report be filed?

Reports are to be published in an EU member state business register and also on the company’s website. Reports must remain accessible for at least five years.

V. How can RSM help clients with respect to the EU Public CbCR Directive?

RSM US LLP can provide support and guidance with: (i) assessing whether certain multinational groups are in scope of the new public CbCR rules; (ii) developing a plan to comply with new public CbCR disclosure requirements (e.g., gathering the required information outlined in section II of this alert); and (iii) coordinating with RSM’s local country member firms to satisfy the new requirements (e.g., designing external communication and website disclosures, etc.)

Members of RSM’s International Tax and Washington National Tax teams will continue to monitor the implementation status of the EU Public CbCR Directive. Please feel free to reach out to Alec Zucker, Ramon Camacho or Julia Gowe with any questions.