Country-by-country reporting (CBCR) is a tax transparency tool which aims at requiring sufficient data to be able to distinguish the part of the activity of a business with multinational reach (multinational enterprises - MNEs) that is related to a specific country.

On 12 April 2016, the Commission presented a proposal for a public CBCR for businesses with multinational reach and with a total consolidated group revenue of at least €750 million. The proposal is an amendment to the Accounting Directive 2013/34/EU, adopted by the Parliament and the Council (which already includes CBCR elements for some sectorial industries - logging and extractive). The proposal aims at inserting an additional chapter in the Directive relating to ‘Report on Income tax information’.

In the European Parliament, the ‘Joint committee procedure’ was applied. As a result, the committees responsible for the preparation of the European Parliament position were the Legal Affairs Committee (JURI) and Economic and Monetary Affairs Committee (ECON). The question of the legal basis was also assessed. After the vote on the report in a joint committee meeting in June 2017, the amendments were adopted by Plenary in July 2017 and the file was referred back for interinstitutional negotiations to the committees responsible.

A qualified majority was reached on the proposal for CBCR at the meeting of EU Competitiveness Ministers in February 2021, paving the way for trilogues.

On 1 June, the Portuguese presidency of the Council reached a provisional political agreement with the European Parliament’s negotiating team on the proposed public CBCR directive. The agreed text required multinational enterprises or standalone undertakings with a total consolidated revenue of more than €750 million in each of the last two consecutive financial years, whether headquartered in the EU or outside, to disclose publicly income tax information in each Member State, as well as in each third country listed in Annex I of the Council conclusions on the EU list of non-cooperative jurisdictions for tax purposes or listed for two consecutive years in Annex II of these Council conclusions.

The Council adopted its position at first reading on 28 September 2021 on the proposed directive on the disclosure of income tax information by certain undertakings and branches, paving the way for its final adoption. The Final Act was signed on 24 November 2021 and published in the Official Journal on 1 December 2021.

References:

• EP Legislative Observatory, Procedure file on directive on disclosure of income tax information by certain undertakings and branches, 2016/0107(COD)
• Council of the EU, Note ‘Outcome of the European Parliament’s proceedings’, July 2017
• Council of the EU, ECOFIN Report to the European Council on tax issues, June 2018
• Council of the EU, Note, January 2019
• Council of the EU, Joint statement, November 2019
• Council of the EU, Note, December 2019
• Official Journal, 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, December 2021

Further reading:

• European Parliamentary Research Service, Public country by country reporting proposal, Legislative briefing, April 2019

Author: Pieter Baert, Members' Research Service, legislative-train@europarl.europa.eu