Strategizing Multinational Tax Risks

The EU Economic and Financial Affairs Council (ECOFIN) has drafted a directive, subject to European Parliament’s opinion, for EU consistency of country-by-country (CbC) reporting.

The proposed EU legal instrument provides for:

• 2016 CbC reporting to the Member State where it is resident
• Optional provision for non-EU parent companies; 2016 reporting is optional via its EU subsidiaries and such “secondary reporting” will be mandatory for the 2017 tax year.   
• Automatic exchange of CbC reports between EU Member States

http://www.consilium.europa.eu/en/press/press-releases/2016/03/08-corporate-tax-avoidance/

This surprising draft directive will alleviate some concerns by US headquartered MNE’s (as 2016 CbC reports will probably not be required), although only within the EU.  To the extent non-EU Member States have CbC reporting obligations for the 2016 tax year, a Surrogate Entity or local filing may still be required for US MNE’s.

The EU is still recognized as a leader in pushing forward BEPS Action items, and this directive would provide much-needed consistency among Member States for CbC reporting.  This development is important to monitor going forward, as well as observing other non-EU countries for a follow-the-leader approach.