Ready for public CbCR?

18/09/24

As of June 22, 2024, in line with EU-legislation, the Dutch act on public Country-by-Country Reporting Directive (public CbCR) applies. The law mandates public reporting for large, international companies. The reporting obligation applies to fiscal years starting on or after June 22, 2024. Therefore, it is possible that public CbCR already applies to you or will take effect soon

What does this mean for your organisation?

The reporting obligation is applicable to below categories of companies with a (group) revenue of at least EUR 750 million in the relevant and previous year:

The ultimate parent company that is at the top of an overall group (that meets the turnover limit);
A stand-alone company that does not belong to a group (but meets the turnover limit);
Medium-sized and large companies that are a subsidiary of a company that is not established in an EU Member State (and meets the turnover limit at that level) and are the designated EU company to make the publication; or
Qualifying fixed establishments/branches with an independent turnover of EUR 12m that belong to a group whose ultimate parent company is located outside the EU.

If your organisation falls in one of the categories, information like corporate income tax paid, number of employees and income, would need to be publicly reported per country.

A new era in Tax Transparency

The perception of tax has changed. Tax is no longer seen as a basic cost of doing business, increasingly it is being viewed as a powerful indicator of a company’s societal impact and a reflection of its broader values and purpose. The tax footprint of an organisation - how much taxes are paid, and to whom - is also something investors and the public are increasingly asking companies to report on, most notably in the context of the broader ESG agenda (Environmental, Social and Governance). Tax transparency is being factored into stakeholder considerations when assessing the sustainability of a business.

For many businesses, tax transparency is an opportunity to build trust with stakeholders and provide assurances that they are adopting responsible tax practices. By building trust in tax reporting, companies can help establish trust in other areas

Public CbCR in the Netherlands

Country-by-country reporting was first introduced in the Netherlands in 2016, stemming from the recommendations in the OECD’s base erosion and profit shifting (BEPS) Action 13 (the CbC).

It requires an entity of a multinational group, often the ultimate parent entity, to report certain financial information (such as corporate tax paid, revenue, profit, and employees) per country to the Dutch tax authorities.

In December 2023, the Dutch Senate approved the legislation to implement the EU Public Country-by-Country Reporting Directive from 2021 (the public CbCR). The additional implementation decree was published on 1 March 2024. In line with the directive, this new Dutch legislation requires multinational groups with a total consolidated revenue of at least EUR 750m, whether headquartered within the European Union or not, to publicly disclose among other things the corporate income tax (and related information) they pay in each EU Member State. In addition, they are required to disclose the same information relating countries that are either on the EU list of non-cooperative jurisdictions for tax purposes (the “EU blacklist”) or listed for two consecutive years on the list of jurisdictions that do not yet comply with all international tax standards but have committed to reform (the “EU grey list”).

Reporting starts for financial years starting on or after 22 June 2024. For companies that have a financial year that is the same as the calendar year, this means that they will first report over 2025. This report would need to be publicly disclosed (on the company's website and via the trade register) on 31 December 2026 at the latest.

Global developments

The concept of public CbCR also exists outside the EU. For example, Australia now has its own public CbCR. These rules apply to fiscal years beginning on or after July 1, 2024. Additionally, the Financial Accounting Standards Board (FASB) in the US has unanimously approved new measures for tax transparency.

In the light of these public CbCR and tax transparency developments, the Financial Accountability and Corporate Transparency (FACT) Coalition - a non-partisan alliance of more than 100 state, national and international organisations - has requested the U.S. Securities and Exchange Commission (SEC) to incorporate public CbCR in the SEC tax disclosures for certain large filers based on the standards developed by the Global Reporting Initiative (GRI). This would result in an even more widespread impact of the global public CbCR movement. The SEC has not yet made a decision on this.

A level playing field is helpful. For example, AmCham has asked Romania to reconsider the implementation date, now that Romania has introduced these rules as of 2023. Due to Romania's rapid implementation, companies have not had time to prepare for the new rules, resulting in inconsistent reporting in 2024 and divergent reporting in 2025. This would not only affect taxpayers but also the tax authorities.

Finally, we note that Pillar Two legislation makes the relevance of an accurate CBCR reporting even greater, now that the CBCR reporting is the basis for the so-called temporary safe harbor scheme of Pillar 2.