(May 25, 2015) 

On May 7, 2015 the European Parliament’s Legal Affairs Committee approved a mandate to start informal talks with the Council, with a view to reaching a first-reading agreement for a directive of the European Parliament and of the Council amending Directive 2007/36/EC and Directive 2013/34/EU. Although the title of the press release that the European Parliament issued in this respect (“Give shareholders more say on directors’ pay, urge Legal Affairs Committee MEPs”) might not directly attract the attention of tax specialists, in our opinion the matter is interesting for tax specialists. The reason here for is that the Legal Affairs Committee a.o. proposes that Directive 2013/34/EU is amended in such a way that companies are obliged to provide more specific information regarding taxes in the Notes to their Financial Statements.

 

On May 7, 2015 we already reported that the European Parliament’s Legal Affairs Committee approved a mandate to start informal talks with the Council by 13 votes to 10, with a view to reaching a first-reading agreement (See our Article from May 7, 2015). At that time only a press release was available.

 

On May 12, 2015 a document titled: “Committee report tabled for plenary, 1st reading/single reading” was made available on the website of the European Parliament. The document a.o. seems to contain proposals for amendments to be made to Directive 2013/34/EU of June 26, 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings (amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC). It furthermore contains a proposal to amend Directive 2004/109/EC of December 15, 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC.

 

Amendments proposed to Directive 2013/34/EU (for as far as they relate to disclosure to be provided in the notes to the financial statements regarding taxes)

 

In Article 2 (Definitions) the following point is added:

(17)     'tax ruling' means any advance interpretation or application of a legal provision for a cross-border situation or transaction of a company which might lead to a loss of tax in Member States or which might lead to tax savings for the company resulting from artificial intra-group transfers of profits.

 

Amendments proposed to be made in CHAPTER 4 - NOTES TO THE FINANCIAL STATEMENTS

 

In Article 18 (Additional disclosures for large undertakings and public-interest entities), the following paragraph is inserted after paragraph 2: 

2a.    In the notes to the financial statements large undertakings and public-interest entities shall also disclose, specifying by Member State and by third country in which they have an establishment, the following information on a consolidated basis for the financial year:

(a)        name(s), nature of activities and geographical location;

(b)        turnover;

(c)        number of employees on a full time equivalent basis;

(d)        value of assets and annual cost of maintaining those assets;

(e)        sales and purchases;

(f)         profit or loss before tax;

(g)        tax on profit or loss;

(h)        public subsidies received;

(i)          parent companies shall provide a list of subsidiaries operating in each Member State or third country alongside the relevant data.

 

In Article 18, paragraph 3 is replaced by the following:

3.           Member States may provide that point (b) of paragraph 1 and paragraph 2a are not to apply to the annual financial statements of an undertaking where that undertaking is included within the consolidated financial statements required to be drawn up under Article 22, provided that that information is given in the notes to the consolidated financial statement.

 

The following Article 18a is inserted: 

Article 18a

Additional disclosure for large undertakings

 

1.           In the notes to the financial statements, large undertakings shall, in addition to the information required under Articles 16, 17, 18 and any other provisions of this Directive, publicly disclose essential elements of and information regarding tax rulings, providing a break-down by Member State and by third country in which the large undertaking in question has a subsidiary. The Commission shall be empowered to set out, by means of delegated act in accordance with Article 49, the format and content of publication.

 

2.           Undertakings of which the average number of employees on a consolidated basis during the financial year does not exceed 500 and which, on their balance sheet dates, have on a consolidated basis either a balance sheet which does not exceed a total of 86 million euros or a net turnover which does not exceeds 100 million euros shall be exempt from the obligation set out in paragraph 1 of this Article.

 

3.           The obligation set out in paragraph 1 of this Article shall not apply to any undertaking governed by the law of a Member State whose parent undertaking is subject to the laws of a Member State and the information of which is included in the information disclosed by that parent undertaking in accordance with paragraph 1 of this Article.

 

4.           The information referred to in paragraph 1 shall be audited in accordance with Directive 2006/43/EC.

 

Amendments proposed to Directive 2004/109/EC

 

In paragraph 1 of Article 2 (Definitions) the following point (r) is added:

(r)         'tax ruling' means any advance interpretation or application of a legal provision for a cross border situation or transaction of a company which might lead to a loss of tax in Member States or which might lead to tax savings for the company resulting from artificial intra-group transfers of profits. 

 

The following Article 16a is inserted:

Article 16a

Additional disclosure for issuers

 

1.           Member States shall require each issuer to annually publicly disclose, specifying by Member State and by third country in which it has a subsidiary, the following information on a consolidated basis for the financial year:

(a)          name(s), nature of activities and geographical location

(b)          turnover

(c)          number of employees on a full-time equivalent basis

(d)          profit or loss before tax

(e)          tax on profit or loss

(f)           public subsidies received

 

2.           The obligation set out in paragraph 1 of this Article shall not apply to any issuer governed by the law of a Member State whose parent company is subject to the laws of a Member State and of which the information is included in the information disclosed by that parent company in accordance with paragraph 1 of this Article.

 

3.           The information referred to in paragraph 1 shall be audited in accordance with Directive 2006/43/EC and shall be published, where possible, as an annex to the annual financial statements or, where applicable, to the consolidated financial statements of the issuer concerned.

 

The following Article 16b is inserted: 

Article 16b

Additional disclosure for issuers 

 

1.           Member States shall require each issuer to publicly disclose annually, on a consolidated basis for the financial year, essential elements of and information regarding tax rulings, providing a break-down by Member State and by third country in which it has a subsidiary. The Commission shall be empowered to set out, by means of delegated acts in accordance with Article 27(2a), (2b) and (2c), the format and content of publication.

 

2.           The obligation set out in paragraph 1 of this Article shall not apply to any issuer governed by the law of a Member State whose parent company is subject to the laws of a Member State and whose information is included in the information disclosed by that parent company in accordance with paragraph 1 of this article.

 

3.           The information referred to in paragraph 1 shall be audited in accordance with Directive 2006/43/EC and shall be published, where possible, as an annex to the annual financial statements or, where applicable, to the consolidated financial statements of the issuer concerned." 

 

In Article 27 (Committee procedure), paragraph 2a is replaced by the following:

(2a)   The power to adopt the delegated acts referred to in Article 2(3), Article 5(6), Article 9(7), Article 12(8), Article 13(2), Article 14(2), Article 16a(1), Article 17(4), Article 18(5), Article 19(4), Article 21(4), Article 23(4), Article 23(5) and Article 23(7) shall be conferred on the Commission for a period of 4 years from January 2011. The Commission shall draw up a report in respect of delegated power at the latest 6 months before the end of the four-year period. The delegation of power shall be automatically extended for periods of an identical duration, unless the European Parliament or the Council revokes it in accordance with Article 27a. 

 

Click here to be forwarded to the Report of May 12, 2015 on the proposal for a directive of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement, as available on the website of the European Parliament.

 

 

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