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
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.