EU Approves Directive On CbC reporting of tax information
On May 26, 2016, the Council of the European Union approved a Directive on the country-by-country (CbC) reporting of tax information by multinational corporations and automatic exchange of that information between EU tax authorities, which member states would be required to adopt.
The Directive is the first element of the anti-tax avoidance package released by the European Commission in January 2016. The directive transposes the OECD recommendation on CbC reporting under base erosion and profit shifting Action 13 into a legally binding EU instrument.
The Directive requires a multinational corporation with total consolidated group revenue of at least EUR750m (USD837.6m) to file a CbC report to the tax authorities of the member state where it is tax resident, already for the 2016 fiscal year. If the parent company is not EU tax resident and does not file a report, it must do so through its EU subsidiaries. Such “secondary reporting” will be optional for the 2016 fiscal year, but mandatory as from the 2017 fiscal year.
Information to be reported, on a CbC basis, includes revenues, profits, taxes paid, capital, earnings, tangible assets, and the number of employees. The Directive requires EU tax authorities to exchange these details automatically to assess tax avoidance risks related to transfer pricing.
The directive sets deadlines of 12 months after the fiscal year for filing, and a further three months for automatic exchange. It also requires member states to lay down rules on penalties for infringements.
Source: Tax News
