Print

On December 1, 2021, DIRECTIVE (EU) 2021/2101 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 24 November 2021 amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches was published in the Official Journal of the European Union. The Directive will This Directive shall enter into force on December 21, 2021.  Based on Article 2, Paragraph 1 of the Directive Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by June 22, 2023. Based on Article 48g that is to be inserted in Directive 2013/34/EU ("Commencement date for reporting on income tax information") Member States shall ensure that laws, regulations and administrative provisions transposing Articles 48a to 48f apply, at the latest, from the commencement date of the first financial year starting on or after June 22, 2024.

 

The Directive introduces a new Chapter 10a is to be inserted after Paragraph 48 of Directive 2013/34/EU of the European Parliament and of the Council of 26 June 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.

 

The newly to be inserted Chapter 10a contains the following 8 articles:

·    Article 48a - Definitions relating to reporting on income tax information;

·    Article 48b - Undertakings and branches required to report on income tax information;

·    Article 48c -  Content of the report on income tax information

·    Article 48d - Publication and accessibility

·    Article 48e - Responsibility for drawing up, publishing and making accessible the report on income tax information

·    Article 48f -  Statement by statutory auditor

·    Article 48g - Commencement date for reporting on income tax information

·    Article 48h - Review clause

 

Some highlights

 

Definition of revenue

Article 48a, Paragraph 2 states that for the purposes of Article 48b of this Directive, “revenue” has the same meaning as:

(a)   “net turnover”, for undertakings governed by the law of a Member State that do not apply international accounting standards adopted on the basis of Regulation (EC) No 1606/2002; or

(b)   “revenue” as defined by or within the meaning of the financial reporting framework on the basis of which the financial statements are prepared, for other undertakings.

 

Undertakings and branches required to report on income tax information

 

Ultimate parent undertakings

Based on Article 48b, Paragraph 1 ultimate parent undertakings governed by the national laws of a Member State with a consolidated revenue on their balance sheet date exceeded for each of the last two consecutive financial years a total of EUR 750 million, as reflected in their consolidated financial statements, are required to draw up, publish and make accessible a report on income tax information as regards the latter of those two consecutive financial years.

 

It should be noted that the Directive arranges that Member States shall provide for an ultimate parent undertaking to no longer be subject to the reporting obligations where the total consolidated revenue on its balance sheet date falls below EUR 750 million for each of the last two consecutive financial years as reflected in its consolidated financial statements.

 

Standalone undertakings

Based on Article 48b, Paragraph 1 standalone undertakings governed by the national laws of a Member State with a revenue on their balance sheet date exceeded for each of the last two consecutive financial years a total of EUR 750 million, as reflected in their annual financial statements, are required to draw up, publish and make accessible a report on income tax  information as regards the latter of those two consecutive financial years.

 

However, it should be noted that the Directive arranges that Member States shall provide for a standalone undertaking to no longer be subject to the reporting obligations set out in the third subparagraph where the total revenue on its balance sheet date falls below EUR 750 million for each of the last two consecutive financial years as reflected in its financial statements.

 

With respect to standalone undertakings the Directive also arranges that Member States shall provide that the rule set out in paragraph 1 does not apply to standalone undertakings or ultimate parent undertakings and their affiliated undertakings where such undertakings, including their branches, are established, or have their fixed places of business or permanent business activity, within the territory of a single Member State and no other tax jurisdiction.

 

The exception included Article 48b, Paragraph 3

Article 48b, Paragraph 3 arranges that Member States shall provide that the rule set out in Article 48b, Paragraph 1 (See above) does not apply to standalone undertakings and ultimate parent undertakings where such undertakings or their affiliated undertakings disclose a report, in accordance with Article 89 of Directive 2013/36/EU of the European Parliament and of the Council, that encompasses information on all of their activities and, in the case of ultimate parent undertakings, on all the activities of all the affiliated undertakings included in the consolidated financial statements.

 

Medium-sized undertakings, large subsidiary undertakings and branches

Article 4b also contains regulations regarding the reporting obligations of medium-sized undertakings, large subsidiary undertakings and branches.

 

Content of the report on income tax information

Article 48c, Paragraph 1 states: “The report on income tax information required under Article 48b shall include information relating to all the activities of the standalone undertaking or ultimate parent undertaking, including those of all affiliated undertakings consolidated in the financial statements in respect of the relevant financial year.

 

Based on Article 48c, Paragraph 2 this information shall consist of:

(a)   the name of the ultimate parent undertaking or the standalone undertaking, the financial year concerned, the currency used for the presentation of the report and, where applicable, a list of all subsidiary undertakings consolidated in the financial statements of the ultimate parent undertaking, in respect of the relevant financial year, established in the Union or in tax jurisdictions included in Annexes I and II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes;

(b)   a brief description of the nature of their activities;

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

(d)   revenues (these revenues shall include transactions with related parties), which are to be calculated as:

(i)    the sum of the net turnover, other operating income, income from participating interests, excluding dividends received from affiliated undertakings, income from other investments and loans forming part of the fixed assets, other interest receivable and similar income as listed in Annexes V and VI to this Directive; or

(ii)   the income as defined by the financial reporting framework on the basis of which the financial statements are prepared, excluding value adjustments and dividends received from affiliated undertakings;

(e)   the amount of profit or loss before income tax;

(f)    the amount of income tax accrued during the relevant financial year, which is to be calculated as the current tax expense recognised on taxable profits or losses of the financial year by undertakings and branches in the relevant tax jurisdiction; (The current tax expense shall relate only to the activities of an undertaking in the relevant financial year and shall not include deferred taxes or provisions for uncertain tax liabilities.)

(g)   the amount of income tax paid on a cash basis, which is to be calculated as the amount of income tax paid during the relevant financial year by undertakings and branches in the relevant tax jurisdiction; (Taxes paid shall include withholding taxes paid by other undertakings with respect to payments to undertakings and branches within a group) and

(h)   the amount of accumulated earnings at the end of the relevant financial year. (the accumulated earnings shall mean the sum of the profits from past financial years and the relevant financial year, the distribution of which has not yet been decided upon. With regard to branches, accumulated earnings shall be those of the undertaking which opened the branch)

 

Member States shall permit the information listed in paragraph 2 of this Article to be reported on the basis of the reporting instructions referred to in Section III, Parts B and C, of Annex III to Council Directive 2011/16/EU.

 

The information shall be presented using a common template and electronic reporting formats which are machine-readable. The European Commission shall, by means of implementing acts, lay down that common template and those electronic reporting formats. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 50(2)

 

The report on income tax information shall present the information referred to in paragraph 2 or 3 separately for each Member State. Where a Member State comprises several tax jurisdictions, the information shall be aggregated at Member State level.

 

The report on income tax information shall also present the information referred to in paragraph 2 or 3 of Article 48c separately for each tax jurisdiction which, on 1 March of the financial year for which the report is to be drawn up, is listed in Annex I to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, and shall provide such information separately for each tax jurisdiction which, on 1 March of the financial year for which the report is to be drawn up and on 1 March of the preceding financial year, was mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes

 

An important exception to the public reporting obligations is to be found in Article 48c, Paragraph 6 which reads as follows:

Member States may allow for one or more specific items of information otherwise required to be disclosed in accordance with paragraph 2 or 3 to be temporarily omitted from the report where their disclosure would be seriously prejudicial to the commercial position of the undertakings to which the report relates. Any omission shall be clearly indicated in the report together with a duly reasoned explanation regarding the reasons therefor.

 

Member States shall ensure that all information omitted pursuant to the first subparagraph is made public in a later report on income tax information, within no more than five years of the date of its original omission.

 

Member States shall ensure that information pertaining to tax jurisdictions included in Annexes I and II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, as referred to in paragraph 5 of this Article, may never be omitted.

 

Publication and accessibility

The report on income tax information and the statement mentioned in Article 48b of this Directive shall be published within 12 months of the balance sheet date of the financial year for which the report is drawn up as provided for by each Member State in accordance with Articles 14 to 28 of Directive (EU) 2017/1132 of the European Parliament and of the Council (***) and, where relevant, in accordance with Article 36 of Directive (EU) 2017/1132

 

Responsibility for drawing up, publishing and making accessible the report on income tax information

Member States shall provide that the members of the administrative, management and supervisory bodies of the ultimate parent undertakings or the standalone undertakings referred to in Article 48b(1), acting within the competences assigned to them under national law, have collective responsibility for ensuring that the report on income tax information is drawn up, published and made accessible in accordance with Articles 48b, 48c and 48d.

 

Member States shall provide that the members of the administrative, management and supervisory bodies of the subsidiary undertakings referred to in Article 48b(4) of this Directive and the person or persons designated to carry out the disclosure formalities provided for in Article 41 of Directive (EU) 2017/1132 for the branches referred to in Article 48b(5) of this Directive, acting within the competences assigned to them by national law, have collective responsibility for ensuring, to the best of their knowledge and ability, that the report on income tax information is drawn up in a manner that is consistent with or in accordance with, as relevant, Articles 48b and 48c, and that it is published and made accessible in accordance with Article 48d.

 

Statement by statutory auditor

Member States shall require that, where the financial statements of an undertaking governed by the law of a Member State are required to be audited by one or more statutory auditors or audit firms, the audit report shall state whether, for the financial year preceding the financial year for which the financial statements under audit were prepared, the undertaking was required under Article 48b to publish a report on income tax information and, if so, whether the report was published in accordance with Article 48d.

 

Once again the information provided above are just some highlights of what is arranged in the new Directive and does NOT contain all the regulations laid down in the new Directive. The full text of the Directive as published in the Official Journal of the European Union you can find here.

 

 

Copyright – internationaltaxplaza.info

 

 

Follow International Tax Plaza on Twitter (@IntTaxPlaza)