What exactly is it?
Since the implementation of the Programme Act of 1 July 2016, Belgium has introduced transfer pricing documentation in accordance with the OECD guidelines. Multinationals must submit a number of reports (local file, master file and country report) annually and can therefore no longer avoid having a well-considered and detailed transfer pricing policy.
One of those reports is the country report or ‘country-by-country reporting’, in short, the ‘CbC report’. The obligation to prepare such a report applies to multinational groups with a total of EUR 750 million or more in consolidated gross group income. The reporting period concerned is the one immediately preceding the last completed reporting period.
Provisional agreement on publication
At the beginning of June 2021, the European Parliament and the Council negotiated a draft directive on public country-by-country reporting (or ‘Public CbCR’) for large multinational groups.
When this directive becomes effective, every European, non-European multinational group or independent company (so-called ‘standalone entities’) will have to disclose certain financial data. This also means that the corporate tax paid will be made public, including the corporate tax paid by companies in each EU Member State, as well as in each of the countries blacklisted by the EU, or, moreover, in each of the countries included on the EU’s so-called ‘grey list’ or ‘watch list’ for two consecutive years. The disclosure will also cover, among other things, revenue and the number of employees.
The directive itself will provide a complete and exhaustive list of information which must be reported but this has yet to be defined in more detail. The final deadline for this reporting is twelve months after the balance sheet date of the financial year concerned. In principle, all Member States concerned must transpose the directive into national law within eighteen months of its entry into force.
The provisional agreement does contain a ‘confidentiality clause’ that describes the specific conditions under which a multinational group or independent company could postpone certain data for a period of up to five years. Finally, an evaluation of the directive is foreseen after four years.
A compromise has been reached for the time being, but the provisionally agreed text still has to be finally approved in a final vote in the Council of the EU by qualified majority. Finally, the European Parliament must also consider this, by a simple majority of its members.
It remains to be seen what the final outcome of this disclosure will be and what consequences this will entail in practice. No doubt it is not the last word on the matter, but one thing is certain: the pursuit of greater transparency is also being translated into practice.
In the meantime, if you have any questions about this scheme, please do not hesitate to contact us. Our experts will be happy to help you.