On Thursday 11 November 2021, the EU Parliament agreed new rules by which multinational corporations will be required to publicly report the taxes paid in each EU country. Multinationals (and their subsidiaries) active in more than one EU country and with annual revenues over €750 million will have to publish the amount of tax they pay in each member state. The information also must be made publicly available on the internet, using a common template and a machine-readable format.

The agreement approved by Members of the European Parliament (MEPs) intends to increase transparency of the data provided by companies and will need to be broken down into specific points, including: the nature of the company’s activities, the number of full-time employees, the amount of profit or loss before income tax, the amount of both accumulated and paid income tax, and accumulated earnings.

Safeguards and provisions

Subsidiaries or branches below the revenue threshold will also be required to publish their tax information if they are deemed to exist only to help the parent company avoid the new reporting requirements.

There are provisions to allow multinationals to be temporarily exempt from some reporting requirements, but there are strict conditions for both adherence and exemption.

Reporting on tax havens

According to the legislative text, the tax transparency reports also extend to the list of non-cooperative jurisdictions for tax purposes outside the EU (countries on the so-called EU “black” and “grey” lists).

In January 2021, the EU Parliament acknowledged reports showing that 6 of the 20 largest tax havens are EU countries, with EU member states being two of the top six. A study by the Director of the EU Tax Observatory concluded that c. 80% of profits shifted in the EU are channelled to EU tax havens.

Next steps

The directive will enter into force 20 days after publication in the Official Journal. Member states will then have 18 months to transpose the law into their national laws. Businesses will need to be complying with the first provisions of the directive by mid-2024. The agreed legislation includes a review clause – the rules will be revisited in four years and assessed for extension. We will keep you informed on developments.

Should you wish to discuss this further, contact your Auxadi Tax Team, or simply get in touch.

Local Knowledge – International Coverage

Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

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Francisco Javier Curto Martin
Sr. Manager. Tax Support

All information contained in this publication is up to date on 2021. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.