On Wednesday 17 May, the Maltese Presidency of the Council of the EU is to present a new version of what could end up as the public country-by-country reporting, compiling certain accountancy data (profits, tax paid, etc.) of major European companies. This is a highly controversial dossier, both in its form (legal base) and in the substance.
A small change added by the Maltese Presidency states that businesses will be required to publish a report if its net consolidated turnover exceeded €750 million in the previous two years. The initial proposal did not refer to any obligation to maintain this turnover for two consecutive years (see EUROPE 11528, 11510).
The Maltese text also states that companies must publish this report “as regards the later of the last two consecutive financial years” in question (during which turnover exceeded €750 million), but the reference to ‘on an annual basis’ has been deleted.
The member states may offer exemptions from this requirement to groups whose parents and subsidiaries are established in a single country of the EU and if the operations carried out by one of these companies, “in any other country, including by ways of branches opened in that country, give rise to no income tax liability in that country”. The same applies for non-affiliated businesses that are otherwise covered by the directive.
Certain businesses will also be exempted from the directive if the publication of the information in question would be “seriously prejudicial to the commercial position of the undertaking or the macroeconomic stability of a member state”.
Companies will also be exempted if a single affiliated company is active in a jurisdiction not included on the European blacklist of tax havens.
The text put forward by the Presidency also set in stone the principle of ‘comply or explain’. For instance, in the recitals (but the wording also appears in several articles), the directive as modified by the Presidency states that for groups with activities in the EU only through subsidiary undertakings or branches, these subsidiaries or branches would have to publish the country-by-country report of the parent company “to the extent that the requested information is available to the subsidiary or branch”. In order to do this, it must request the information in question from its parent company. “If the requested information is not available, the subsidiary or branch should explain in the report the reasons of this omission”, the compromise proposal states.
The Presidency’s text goes on to state that if a subsidiary exceeds the threshold of €750 million, it must publish its report.
The compromise proposal also specifies that the blacklist of non-cooperative third countries will be the list currently being prepared by the Council’s Code of Conduct group on corporate taxation and not a delegated act of the European Commission. Companies with activities in the jurisdictions on this list will be required to detail their accounts on a country-by-country basis for those countries. For the other third countries not on the list, information of a global nature (valid for the rest of the world) will suffice.
Lastly, the Maltese Presidency proposes that the text shall apply not one but two years after its entry into force. (Original version in French by Élodie Lamer)