EU Gateway: narrative and accuracy in public CbCR

20/12/24

From 1 January 2025 onwards, certain MNE companies with a presence in the EU may be confronted with a new reporting obligation: public Country-by-Country Reporting (pCbCR). This obligation is derived from the public CbCR Directive. This Directive requires large MNEs to publicly disclose key financial data for:

Each EU Member State;

Each EU blacklisted jurisdiction;

Each EU greylisted jurisdiction;

Third countries (on an aggregated basis)

The obligations stemming from the pCbCR Directive apply to financial years starting on or after 22 June 2024. This means that for companies following a calendar year, 2025 will be the first year that needs to be reported. Reporting is mandatory.

What does it mean for your organisation?

Contrary to the private/confidential CbCR information provided to tax authorities, the pCbCR information is accessible to a broad audience, including journalists, the general public, NGOs, and tax authorities themselves. The accuracy of this data, as well as its alignment with other reporting obligations such as ESG reports and disclosures that your organization currently has or may have in the near future, is crucial. Public CbCR should also be considered in parallel with the application of the Pillar Two Safe Harbour rule.

At the same time, especially for non-EU headed groups, the obligations stemming from pCbCR can be particularly burdensome, leading to a multiplication of reporting requirements. MNEs should be aware of these obligations, their scope, and any simplification measures that can be opted for. If no simplification measure is chosen, PwC's broad network of specialists, through our EU gateway services, can assist in managing these requirements.

Why Public CbCR?

The pCbCR represents a significant shift in the landscape of tax transparency in the EU. It aims, among other things, to give stakeholders a clearer view of multinational enterprises' (MNEs) tax contributions and economic activities. It also aims to improve shareholders’ ability to properly evaluate the risks taken by undertakings, to lead to investment strategies based on accurate information, and to enhance the ability of decision-makers to assess the efficiency and impact of national legislation.

Requirements to qualify for pCbCR

The group must have a consolidated revenue exceeding EUR 750 million for 2 consecutive years (including financial year in question).

The group must have a presence in the EU. This can be via the ultimate parent entity (UPE), or via subsidiary or branches.

Who is obliged to report?

If the UPE is based in the EU, the UPE is obliged to report.

If the UPE is based outside of the EU, every “medium” and “large” subsidiary undertaking OR “qualifying” branch will have a separate reporting obligation. If the non-EU UPE does not provide the information, they have to draw up a pCBCR report based on the available information. Each medium and large subsidiary has a separate reporting obligation.

A qualifying subsidiary must meet two of the following three requirements: 1) have an average number of employees exceeding 50, 2) have a balance sheet greater than EUR 5 million, or 3) have net revenue greater than EUR 10 million. A branch simply needs to meet the revenue threshold. These thresholds may be different in some EU Member States according to the local legislation.

There is a possibility of simplifying the multiple reporting obligations for non-EU headquartered MNEs to an EU single undertaking when certain requirements are met.

What do you need to report?

The information that you need to report is largely similar to the information required for CbCR. Think about income tax paid and accrued, number of employees, amount of profit or loss before income tax, short description of activities of each group company. For a detailed list of information to be included in the pCBCR report, you can take a look at our BN tax article: Tax Transparency: Is your company ready for Public CbCR?

The information shall be provided:

per EU Member State,

per EU blacklisted jurisdiction (those listed on 1 March of the financial year for which the report on income tax information is to be drawn up)

per EU grey listed jurisdiction (those listed on 1 March of the financial year for which the report on income tax information is to be drawn up and on 1 March of the preceding financial year), and

for the rest of the world (on an aggregated basis)

There is a possibility to use the data for private CbCR (to tax authorities) as a base for pCbCR if in accordance with EU Directive DAC4’s country-by-country reporting.

EU Member States are given the option to allow temporary omissions of certain “sensitive” data. Not all EU Member States have made use of this option.

When do you need to report?

The pCbCR obligations apply to financial years starting on or after 22 June 2024.

The deadline to report is no later than 12 months after the end of the financial year.

For most EU Member States, data of 2025 needs to be published by the end of 2026.

‘As the pCbCR Directive is adopted across EU Member States, MNEs are navigating a complex patchwork of timelines and requirements. The differences between the EU Directive and local implementation (e.g. shorter publication deadlines, language requirements, available options), create a significant challenge for MNEs to understand these differences and meet the distinct disclosure obligations. PwC has compiled an EU Public Country-by-Country Reporting Tracker with all necessary information on domestic implementation of the EU pCBCR Directive.

Where do you need to report?

The website of the entity/entities that need(s) to report; and/or only (depending on national implementation of the Directive)

The national commercial register(s) of the EU Member State(s) the entity is/entities are governed by.

Available template for reporting

The European Commission has published the final version of the template for pCbCR purposes. This template is intended for use by an EU UPE. Additionally, a non-EU UPE that makes its CbCR report publicly accessible and selects a single undertaking in the EU to publish the report in that EU Member State is also permitted to use this template.

Non-EU headed groups with pCbCR obligations in the EU are not required to use this template when reporting takes place by each EU subsidiary or branch, in the absence of a p CbCR report at the non-EU UPE level. This issue is particularly concerning if the non-EU UPE does not share the necessary information with its EU operations, forcing each EU subsidiary to report based on a “best effort” approach.