In 2021, European member states took the next step with public information reporting. In December 2023, the parliament approved legislation implementing the European directive (Directive (EU) 2021/2101) on public country-by-country reporting (public CbCR), applicable from the 2021 financial year. An additional decision by the Dutch government on its implementation followed on 1 March 2024.
As a result, large international companies will have to disclose tax-related information on a country-by-country basis from this year. The aim is to promote tax transparency and create a fairer fiscal playing field in the EU. Thus, the obligation goes beyond just providing information to the tax authorities.
Public CbCR obligation
The obligation applies to financial years starting on or after 22 June 2024. For companies with a financial year starting from 1 January 2025, the first report must be published by 31 December 2026. Publication must take place within 12 months of the financial year and the information must remain publicly available for five years.
This new obligation increases reporting pressure. The board is responsible for preparing and publishing the report. Compliance, reputation and data management are becoming increasingly important. In this light, it is essential to start preparing in time.
When does a company fall under the obligation?
The obligation applies to four categories of companies:
- Dutch parent companies of an international group with more than €750 million consolidated turnover (in each of the two previous financial years).
- Independent Dutch companies (not belonging to a group) with a turnover above this threshold.
- Dutch medium-sized or large subsidiaries of parent companies outside the EU, if the global group turnover is above the threshold.
- Dutch permanent establishments of non-EU companies, if the net turnover is above the threshold and there is no medium-sized or large EU subsidiary.
Note that companies operating only in the Netherlands do not have to comply with this requirement. This also applies to financial institutions already reporting under the CRD IV framework.
Content of the obligation
The report contains information on the most recently completed financial year, including:
- The name of the reporting entity;
- the financial year and the currency used;
- a description of the activities;
- the number of employees (in FTEs);
- net turnover;
- the result before tax;
- income tax payable based on the financial statements;
- profit tax actually paid (cash basis);
- retained earnings.
Data must be broken down by country. This applies to all EU and EEA countries (such as Norway, Iceland and Liechtenstein) and tax jurisdictions on the EU list of non-cooperative countries. Other countries may be merged under the heading "Rest of the World".
What are the publication requirements?
In the implementation of the EU Directive, the Netherlands did not elect the publication exception on the company website. This is because the Trade Register (KvK) does not yet offer free access to the data to be filed there. Therefore, the following publication requirements apply in the Netherlands:
- The report must be filed with the Trade Register of the Chamber of Commerce in the Netherlands;
- The report must be available free of charge via the company website;
- The data must be provided in a machine-readable format;
- The information must remain accessible for at least five years.
Exception for sensitive information
Sometimes it is not desirable for a company to disclose certain information directly. For example, if it could seriously damage the commercial position. In such cases, that sensitive information may be temporarily omitted. This is called the safeguard clause. This allows sensitive data to be deferred for up to five years, as long as the reason is clearly explained in the report. This exception does not apply to countries on the EU list of non-cooperative jurisdictions. Those countries must always share all information.
Action plan for companies
Large companies would be wise to act on time:
- Check whether the company falls within the scope of the obligation.
- Collect available data and see what is still missing.
- Set up processes and IT systems for reliable data collection and reporting.
- Implement internal control mechanisms to ensure data accuracy and consistency.
- Create a clear communication plan to inform stakeholders in a timely and clear manner.
- Evaluate whether there is any information that can be temporarily omitted under the safeguard clause.
Concurrence with other obligations
Public CbCR requirement do not stand alone. It must be aligned with existing reporting obligations, such as BEPS Action 13 and the Dutch transfer pricing documentation requirement. It is essential that financial statements, tax returns and public reporting are well aligned. Furthermore, it is important to stay aware of any additional or different requirements that other EU member states may impose. The European Commission will later publish technical standards and templates, which may have an impact on the concrete details of the reporting process.
In addition, multinationals also face other extensive transparency obligations. The global minimum tax (Pillar 2) ensures that profits of large companies are always effectively taxed at a minimum of 15%, regardless of where those profits are earned. This has direct implications for the tax strategy and structure of international groups.
The Corporate Sustainability Reporting Directive (CSRD) also requires extensive sustainability (ESG) reporting. Despite political discussions and delays, Public CbCR provides a stable basis for tax transparency within the EU.
From obligation to strengthening reputation
The introduction of Public CbCR is a major step towards public and fiscal transparency. Working on this obligation now will not only create control in compliance with laws and regulations, but also helps strengthen reputation and governance. This is in line with the social awareness for a fair tax contribution.
We are happy to support you every step of the way: from impact analysis and data preparation to drafting the report and assessing possible exemptions through the safeguard clause.
Want to know more?
Contact us for an exploratory discussion on a future-proof approach to Public CbCR and other reporting requirements.
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