EU Gateway: EU public CbCR

In a rapidly evolving global business landscape, transparency on corporate tax practices of multinational enterprises (MNEs) has become a key focus for regulators and stakeholders alike. The new public transparency requirements in corporate tax matters for large MNEs, known as Public Country-by-Country Reporting (pCbCR), represents a shift from a more traditional confidential company (tax) data reporting to tax authorities to a more open format, i.e., (tax) data reporting to the public. Therefore, the introduction of pCbCR legislation in the EU impacts not only the compliance obligations of companies but also directly affects individual company responsibilities. The shift to such an open format of reporting should also be considered alongside corporate organisations’ agendas regarding sustainability and ESG (Environmental, Social, and Governance).

PCbCR has been introduced in the EU via the Public CbCR Directive (Directive 2021/2101). The EU’s PCbCR initiative is part of standing EU policies to combat tax avoidance and to promote MNE transparency on corporate income tax payments worldwide, thus not only in the EU. The Directive is addressed to the EU Member States. The EU Member States need to transpose the Directive provisions into their national laws. The reporting obligations for MNEs are then based on the national transparency legislation of the relevant EU Member State. The Netherlands, for instance, has implemented the EU pCbCR Directive via legislation and a government Decree, respectively the ‘Implementatiewet Richtlijn openbaarmaking winstbelasting’ of 6 December 2023 (Staatsblad (Government Gazette) 2023, 517), and the ‘Implementatiebesluit Richtlijn openbaarmaking winstbelasting’ of 14 February 2024 (Staatsblad 2024, 43). 

This article outlines some basics of the EU pCbCR legislative framework, examines several divergences in its domestic implementation across various EU Member States, and explores two key aspects of MNE EU pCbCR compliance practices. To that end, firstly, we examine the possibility for non-EU headquartered groups to use an EU group entity for pCbCR compliance purposes, known as the ‘filing hub option’. Secondly, we highlight the importance of ensuring data accuracy and developing a strong narrative in the public CbC report, a matter referred to as ‘Data Accuracy and a Narrative’. Understanding these two aspects is crucial for those MNEs that aim to optimise their filing strategies within the EU while ensuring stakeholder trust. A timely understanding of these helps MNEs prepare for upcoming changes and manage their pCbCR responsibilities effectively, and to stay in control.

EU pCbCR has become a reality for most large MNEs with operations in the EU as per 1 January 2025. Under the new rules, large MNEs (annual consolidated revenue of €750 million or more in each of the last two fiscal years) operating within the EU—whether EU-headquartered or non-EU headquartered—are required to annually prepare and publicly disclose, i.e., with the Commercial Business Registers and on their company websites, a Public CbC report. The new EU transparency rules apply to fiscal years starting on or after 22 June 2024. For MNEs that use calendar years for financial reporting this means that public reporting commences for fiscal year 2025, with public disclosures of CbC reports due by 31 December 2026. As many MNEs align financial years with the calendar, this makes 2025 a pivotal year for pCbC reporting.

The financial data to be publicly disclosed in the report largely mirrors that provided in the confidential CbCR to tax authorities, and includes information such as worldwide corporate taxes paid and accrued, along with a description of the MNE’s activities per group entity and data on the number of employees, revenues and total profits or losses before tax. The EU Directive requires the reporting of these financial metrics to be broken down per individual EU Member State, and per individual jurisdiction that is either EU blacklisted as a non-cooperative jurisdiction or has been EU grey-listed for two consecutive years. For any other third countries where the MNE operates, the reporting requirements apply on an aggregated basis.

The reporting obligations fall on the respective MNE’s ultimate parent entity (UPE) in the case of EU-headquartered MNE groups. For MNEs headquartered outside of the EU, the reporting obligation lies with any medium sized or large EU-based subsidiary company (‘qualifying subsidiary’) or EU-situated branch (‘qualifying branch’), depending on subsidiaries meeting at least two of three thresholds concerning balance sheet total, net turnover and employee numbers, and for branches, meeting the net turnover threshold (see Fig. 1). The EU rules allow individual EU Member States some flexibility on these thresholds. In the Netherlands, for instance, the thresholds for small subsidiaries and branches slightly differ from the EU thresholds, which in turn affects the circumstances under which a medium subsidiary or a branch is recognised in the Netherlands (see Fig. 2).

For a non-EU headquartered MNE group with qualifying subsidiaries or branches within the EU, it is the responsibility of the respective subsidiary or branch to publish and make accessible a public CBC report concerning the non-EU ultimate parent entity (UPE). If such a report is not available to the subsidiary or branch concerned, it needs to request its UPE to provide all necessary information to compile a public CbC report on its own. If the non-EU UPE fails to provide the required information, the subsidiary or branch must prepare and publicly disclose a CbC report, using all the information it has available (possesses, obtains or acquires).  The published report must then state that the non-EU UPE did not provide the necessary information.

The public disclosure of the CbC report needs to be done by making the report available with both the Commercial Business Register in the jurisdiction of the EU UPE or the qualifying subsidiary or branch concerned (in the case of non-EU UPEs), and on the company's website. The latter applies unless the implementing EU Member State involved has chosen to use the so-called website exemption option under the EU Directive, allowing the EU Member States to permit MNE group entities in their jurisdiction to disclose the report exclusively with the Commercial Business Register. However, in such a case, the Commercial Business Register must be open and free-of-charge to ensure the public availability of the CbC report. Additionally, in cases where the respective companies disclose their pCbC   reports only with the Commercial Business Register, they are also required to include a reference on their website (or the website of an affiliated entity in the case of qualifying subsidiaries or branches of non-EU UPEs) directing users to the website of the Commercial Business Register. 

The Netherlands, notably and for instance, has not made use of the website exemption option in the EU Directive. The Dutch Commercial Business Register (‘Handelsregister’) managed by the Dutch Chamber of Commerce (‘Kamer van Koophandel’) is not available for users free of charge. Companies governed by Dutch company law must accordingly ensure pCbCR compliance by making the report available both in the Commercial Business Register as well as on their website. Some further information and details on the pCbCR Directive and its application can be found in this PwC tax article.

The transposition of the EU pCbCR Directive by the EU Member States into their domestic legal orders has resulted in a variety of differences in local transparency regulations. This reveals some notable compliance points. It is noteworthy, for instance, that pCbCR has not started simultaneously in all EU Member States. In Romania and Croatia for instance, pCbCR became effective earlier than the above noted date of 22 June 2024, already in 2023 and 2024, respectively. In addition to this, reporting deadlines vary as well throughout the EU. In Spain, for instance, the deadline for making CbC reports publicly accessible is set at six months from the end of the relevant financial year. This contrasts with most other EU Member States, which follow the EU Directive's twelve-month period from the end of the reportable financial year.

Moreover, the method of publication varies. Referring to the website exemption under the Directive mentioned above, some EU Member States require reporting exclusively through the Commercial Business Register. This is seen, for instance, in Greece and in Belgium. In the Netherlands, on the contrary, as said, the pCbCR report is concurrently published in the Commercial Business Register and on the company’s website. This is also the case in Hungary, for example. On top, language requirements may further complicate compliance, with some EU Member States requiring the CbC reports to be disclosed in their own languages, as is the case for instance in Germany, while other EU Member States allow disclosure in any official EU language, as is the case for instance in Romania, Slovakia and the Netherlands.

Understanding the differences in how the EU pCbCR Directive is implemented throughout the EU is essential for those MNEs seeking to fulfill reporting obligations and remain compliant in an effective and efficient manner. Several matters in this regard are particularly important for non-EU headquartered MNEs, because they seem more exposed to the varied pCbCR legislation across the EU than EU-headquartered MNEs. The reporting obligations of EU-headquartered MNEs rest solely with their UPEs. This specifically holds where any non-EU MNEs operate their business activities via qualifying subsidiaries and branches in a multitude of EU Member States. More information and details on the several disparities in pCbCR rules throughout the EU are available in PwC’s pCbCR tracker, a useful tool for monitoring the divergent domestic implementation of the pCbCR Directive across the EU.

As noted, non-EU headquartered MNE groups with UPEs outside the EU and qualifying subsidiaries or branches within the EU must comply with EU pCbCR obligations as well. The differences in domestic implementation of the EU transparency rules across EU Member States make it challenging for non-EU MNEs to navigate the varying pCbCR requirements. Non-EU MNEs operating through qualifying subsidiaries and branches in several EU Member States may face significant burdens, i.e., as the same CbC report – or some substantially similar CbC reports – as a general rule must then be repetitively published in multiple Commercial Business Registers in the EU and, where required, on the websites of all local group entities (see Figure 3).

To reduce administrative burdens for non-EU MNE groups navigating EU pCbCR, the EU Directive permits these groups to designate a single EU group entity for pCbCR filing, operating as a ‘filing hub’. Although not widely known, it seems, the EU pCbCR Directive (Article 48b par. 6) includes a ‘filing hub option’ that can help non-EU MNE groups reduce administrative burdens while remaining compliant.

The filing hub option under the EU Directive allows for a centralised disclosure of the non-EU MNE groups’ pCbC report in a single EU Member State. The EU Member States are envisaged to honour the exercise of the option by the MNE group, provided that the option is exercised in accordance with the EU Directive conditions. In other words, this option is not an implementation option for the EU Member States (like the website exemption option), but rather an option for non-EU MNE groups to utilise if they wish. Therefore, any non-EU headquartered UPE is eligible to utilise this option by making a pCbCR report publicly accessible, free of charge, and in an electronic reporting format on its website in at least one official EU language within 12 months after the financial year’s balance sheet date. In addition to this, the pCbC report needs to specify the name and registered office of a single subsidiary or branch in an EU Member State, designated to make necessary disclosures in the trade register of that EU Member State. In such a case, all other qualifying EU-based subsidiaries and/or EU-situated branches of the non-EU headquartered MNE group involved are exempt from any pCbCR obligations (see Fig. 4).

Although the filing hub option undoubtedly mitigates administrative burdens and the need for repetitive CbCR disclosures, it does, in practice, raise some administrative unclarities and uncertainties. An example of such an unclarity is that the pCbCR Directive does not specify the format for a non-EU UPE to publish the CbC report. This said, the pCbCR Implementing Regulation (2024/2952), sets forth that there is no impediment for non-EU UPEs to use the EU’s pCbCR template. Another common query is whether any EU group company can serve as a filing hub. The pCbCR Directive specifies that the non-EU UPE must designate a single subsidiary or branch to make the necessary disclosures in the EU Member State in which it is located. From this it may be inferred that, indeed, any group entity is eligible to function as a filing hub, regardless of whether it constitutes a ‘qualifying’ subsidiary or branch. 

Another example of some unclarity that has emerged in practice is the following:  the EU Directive stipulates that the disclosure of the pCbCR report under the filing hub option is to take place at the Commercial Business Register of the EU Member State where the ‘single’ subsidiary or branch is located. This has raised the question of whether the pCbC report should also be made available on the website of the single reporting subsidiary or branch. This would be in addition to the disclosure of the pCbC report on the website of the non-EU UPE (which is, as said, one condition for the filing hub option to apply). Such disclosure would generally be required, for instance, if i)  the filing hub option was not exercised by the non-EU UPE involved, ii) the qualifying subsidiary in that EU Member State would have to file the pCbC report (along with all other qualifying subsidiaries in the EU) and iii) the EU Member State of the qualifying subsidiary has not utilised the website exemption option. In this case, as said above, the Directive allows qualifying subsidiaries (or branches) to disclose the report via an affiliate’s website. However, the Directive does not clarify, in our view, if this also applies to single subsidiary or branches under the filing hub option. From a legal interpretative perspective, this renders matters somewhat indistinct. Worthy of note, additionally, is that if a non-EU UPE does not operate a company website – unusual, perhaps, but not impossible – the filing hub option becomes unavailable.

A further uncertainty involves the matter of how other EU jurisdictions will be informed of the non-EU UPE’s use of the filing hub option in an EU Member State. No governance mechanism has been put in place for communication between the EU Member States, initiating risks of potential non-compliance claims in local EU jurisdictions. Additionally, various EU Member States, as said, have introduced different requirements and thresholds for disclosures, as well as the modes, formats, language and timing of the disclosures, creating further uncertainty about the acceptance of single pCbC report disclosures under the filing hub option.

Unlike the private and confidential CbCR data as shared exclusively with tax authorities under classical transparency requirements, pCbCR under the new rules enhances transparency by the making available of (tax) data to a wide range of stakeholders. These stakeholder audiences not only include company investors but also include journalists, members of the general public concerned with corporate governance, NGOs advocating for tax justice and tax authorities evaluating tax compliance. The wide accessibility of this information emphasises the need for meticulously accurate data that is in alignment with other reporting obligations, such as Environmental, Social, and Governance (ESG) reports. This cross-alignment of data is essential for maintaining stakeholder trust, and this applies equally to the narrative used to present the data.

The narrative accompanying pCbCR data is essential for providing context to the numerical figures. The narrative informs and explains economic activities and the taxation thereon, helping stakeholders understand how profits and taxes align with corporate presence and business operations in individual countries and regions. Narratives may also help mitigate misconceptions by showing MNE commitments to transparency and responsible tax practices. Historically, some renowned companies have published their CbCR reports voluntarily, setting useful best practices and providing valuable insights while pCbCR has grown into becoming an increasingly common and generally accepted phenomenon over the years.

This said, the EU template for pCbCR reporting does not seem to offer that much space for companies to provide a narrative for each figure, except when explaining differences between taxes paid and taxes accrued. However, the template’s general instructions do allow for including additional information in the report, via text, images, or other means. In view of the given option to provide a narrative, from a transparency enhancing perspective, publishing the CbC report on the company website seems to make more sense than publishing it only through the Commercial Business Register. As noted above, some EU Member States require publication in the Commercial Business Register alone, with a simple reference on the company’s website. This of course does not mean that the companies involved would not be permitted to disclose the pCbC report on the company website regardless, and on a voluntary basis.

2025 is a pivotal year for public CbCR in most EU Member States. PCbCR has now been implemented throughout the EU, with first filings due by the end of next year. Although some may contend that there is still some sufficient time before moving into action, it is essential for both EU and non-EU MNEs to be aware of the framework of this new reporting obligation. Non-EU headquartered MNEs will need to decide on using the filing hub option in communicating with their stakeholders and evaluating the pros and cons of a single entity EU pCbCR disclosure. Meanwhile, ensuring data accuracy and a strong narrative is essential – and not just a nice-to-have. Any inconsistencies with confidential CbC reports communicated with country tax authorities could raise questions and pose tax and reputational risks. Moreover, securing data alignment with other widely accessible disclosures under other reporting requirements such as ESG reporting is key for maintaining stakeholder trust. This equivalently applies to the narrative used to present the data. Companies should ensure the robustness of their narrative while considering potential third-party investigations and any associated compliance burdens. 

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