Global Tax Alert (News from the EU Competency Group) | 28 February 2014

Country by country reporting is currently off the EU agenda until 2018

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Executive summary

The European Parliament and the Council reached an agreement on a Commission proposal to improve transparency on social and environmental matters. Certain large companies have to disclose non-financial information on policies, risks and results regarding environmental matters, social and employee-related aspects, aspects for human rights, anti-corruption and bribery issues, and diversity on board directors. Country-by-country reporting (CBCR) requirements in relation to taxation have not been included. In that regard the Commission has to report back on CBCR on tax matters by 2018.

Detailed discussion

In the course of this legislative procedure of an amendment directive1 to the Accounting Directives,2 some Members of the European Parliament wanted to have certain disclosure requirements in relation to taxation be included. Although, the respective proposal does not establish certain CBCR requirements in relation to taxation the Commission regards the current endorsement of the amendment directive proposal as a step forward for a country-by-country disclosure of relevant information for tax purposes. However, the Commissioner for the Internal Market and Services, Michel Barnier, indirectly acknowledges that CBCR for tax purposes seems off the Commission's active agenda apparently until 2018. By 2018 the Commission is asked to report back on country-by-country reporting in tax matters.

Nevertheless, the Commissioner expressed his hope that the new Commission which will take office this year might accelerate this issue. At this point, since the new Commission is not yet elected their political agenda is not yet known. Thus, it remains to be seen whether CBCR for tax purposes will be accelerated.

Following the respective Commission's proposal delivered on 16 April 2013, the European Parliament and the Council agreed on an amendment to the existing EU accounting legal set of rules. This agreement was endorsed by the Permanent Representatives Committee (Coreper) on 26 February 2014. The Coreper's conclusion is a preceding step of the formal adoption of the amendment directive by the European Parliament and the Council. It is expected that these steps will be taken in April 2014. Such proposal is considered by the Commission to mark a first step towards the implementation of the European Council conclusion of 22 May 2013.

Despite acknowledging the objective to keep the administrative burden to a minimum, it appears that a lot of companies and groups are going to be required to disclose a rather broad amount of information. The Commission estimates approximately 6000 companies and groups will be captured by the amended provisions as proposed. Addressees of the proposed requirements are companies or entities at the group level, rather than each individual affiliate within a group, as the case may be. Although, the amendments aim at large public-interest entities, these amendments may cover mainly but not exclusively listed companies and financial institutions. Also, relevant entities are regarded as those which employ more than 500 employees. Thus, covered companies include banks, insurance companies and other companies upon a respective Member States' designation in relation to their activities, size or number of employees.

These proposed amendments aim at companies and groups to disclose concise, useful information necessary for an understanding of their development, performance, position and impact of their activity. Relevant companies and groups will be obliged to disclose information as mentioned afore with respect to policies, risks and results regarding environmental matters, social and employee-related aspects, aspects for human rights, anti-corruption and bribery issues, and diversity on board directors. For example, with respect to the latter, large listed companies will be required to disclose the board of directors' information on age, gender, educational and professional background. The Commission opines that these new requirements are in line with the general EU corporate governance framework. Since the proposed directive leaves some flexibility for companies, companies are granted some discretion as to what information they consider appropriate to meet these new requirements. For example, companies may elect international, European or national guidelines which they consider appropriate. These guidelines include, e.g., UN Global Compact, ISO 26000 or the German Sustainability Act.


1. 2013/0110 (COD).

2. Fourth and Seventh Accounting Directives on Annual and Consolidated Accounts, 78/660/EEC and 83/349/EEC, respectively.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam
  • Ronald van den Brekel
    +31 88 407 9016
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Munich
  • Dr. Klaus von Brocke
    +49 89 14331 12287

EYG no. CM4216