EU mulls reduction in threshold for country-by-country reporting
EU plans for country-by-country reporting could target a much broader base of multinationals if proposals from the European parliament’s Committee on Economic and Monetary Affairs to slash the current threshold are adopted
The proposals to amend the Directive would substantially lower the reporting threshold for multinationals from the current €750m (£637m) to €40m (£34m).
The key amendments to the proposed Directive are:
- EU-headquartered large groups, exceeding any two of €40m consolidated net turnover, €20m gross balance sheet and 250 employees, must file a country-by-country report;
- EU subsidiaries controlled by a non-EU headquartered parent, with a consolidated net turnover exceeding €40m, must file a country-by-country report; and
- multinationals to provide the above information on their worldwide activities, not just for EU member states.
The EU’s Accounting Directive was originally expected to target some 6,000 multinationals in EU member states, accounting for 90% of EU corporate revenues.
By lowering the threshold, the number of global businesses potentially brought into the scope of EU country-by-country reporting will increase significantly and increase their compliance burden.
‘This seems to have gone under the radar so far, but this shift could have a significant impact on a much larger proportion of EU businesses, highlighting a much tougher stance on tax evasion and avoidance,’ says Adam King, tax partner at RSM.
‘The EU’s approach to tackling international tax evasion and tax avoidance continues to get tougher. However, there is uncertainty whether these amendments will ever make law. Will EU member states be prepared to risk alienating foreign enterprises investing in the EU, to increase transparency in the single market? Will more tax be collected by EU member states as a result of reducing the thresholds? Only time will tell, but it’s definitely one to watch as the impact could be significant.’