The EU's directive on public country-by-country reporting was published in the Official Journal on 1 December 2021 to take effect on the twentieth day thereafter. Companies and groups whose revenue exceeds the CbCR threshold of EUR 750 million will be required to make certain information on activities, revenues and tax paid accessible to the public free of charge and in one of the official EU languages. Member States are required to bring into force their implementing measures by 22 June 2023 to take effect from, at the latest, the start of the first financial year starting on or after 22 June 2024. 

Relationship with annual accounts

The Directive amends the Accounting Directive (it is not another DAC). The Directive envisages that the required tax report would have a publication deadline of 12 months from the balance sheet date of the financial year to which it relates and, when the statutory auditors examine the financial statements for one year, they will be required to comment on the tax report for the previous year. 

The Commission is tasked with developing a common template for the report - and here, we do have a link with the DAC - it is envisaged that companies should be able to reuse information provided to the tax authorities under the CbCR provisions. 

Effect on companies established outside the EU

The publication requirement applies primarily to companies and groups headquartered in the EU. Non-EU companies or headquartered groups may, however, be indirectly in scope as medium and large EU subsidiaries (and EU branches meeting the relevant turnover threshold) would be required to report instead. 

What if the relevant subsidiary or branch does not possess the required information? The Directive envisages that they would request the information from the parent and, if it is not forthcoming, the report has to include "a statement indicating that its ultimate parent undertaking did not make the necessary information available." In this way, the measure will make a relatively direct use of the court of public opinion at which the whole measure is clearly directed.