The European Commission has introduced a new initiative aimed at standardizing the way large multinationals report the taxes they pay. This initiative, known as „Tax paid by multinationals: template and electronic formats for country-by-country reports," seeks to create a common template and electronic formats for these reports.

The European Union requires large multinational companies to publish detailed annual reports on the corporate taxes they pay in each country where they operate. This initiative aims to enhance transparency and ensure that the reports are consistent and accessible. Companies with a consolidated net turnover of €750 million or more must report various financial metrics, including total revenue, profit before tax, and tax paid, among others. The first reporting will apply to financial statements starting after June 22, 2024.

A standardized template and electronic submission formats will facilitate the reporting process. A public consultation held from August 1 to September 6, 2024, received positive feedback, leading to plans for a final regulation adoption in the third quarter of 2024. The initiative is strategically important in light of the Pillar II rules, as qualified CbC data will be essential for companies to benefit from Safe Harbor provisions. Overall, this move marks a significant advancement in promoting financial accountability and combating tax evasion.

Who is covered, and what must the reporting contain?

Multinational groups, including Danish foundations and cooperatives, with a consolidated net turnover of €750 million (DKK 5.6 billion) over the last two years must prepare a dataset that includes:

• Total revenue
• Profit before tax
• Tax paid (cash basis)
• Accrued tax (current year)
• Number of employees
• Total accumulated earnings

These groups must also publish a list of their legal entities and a brief description of their activities. The dataset should be prepared at the country level for EU-affiliated entities and reported in aggregate for non-EU entities.

Disclosure of CbC Data

The first CbC data reporting applies to financial reports starting after June 22, 2024, with groups reporting for the calendar year 2025 being the first affected. CbC data must be submitted to the Danish Business Authority for publication in the Central Business Register, and a reference to this report must be on the group's website. While voluntary publication on their website is allowed, it is not required. Exempt Danish entities must still submit the group report to the authority within 12 months after the financial year ends. Disclosure may be withheld for up to five years if it could harm the group's commercial position.

Main Elements of the Initiative

Standardized Template: A uniform template for country-by-country reports will facilitate consistent data collection across companies.

Electronic Formats: Electronic submission formats will streamline reporting and reduce administrative burdens.

Public Consultation: A consultation from August 1 to September 6, 2024, gathered feedback from stakeholders on proposed templates.

Feedback and Next Steps

Feedback from stakeholders was largely positive, with suggestions to ensure consistency with existing provisions and include specific country codes. The European Commission plans to adopt the final regulation in Q3 2024, making it mandatory for large multinationals in the EU and enhancing efforts against tax evasion.