1. Reproduced with permission from BNAI European Tax
Service Monthly Digest, 18 ets 7, 07/30/2016. Copyright ஽
2016 by The Bureau of National Affairs, Inc.
(800-372-1033) http://www.bna.com
JULY 2016

2. Transparency and
beyond—The EU role
in implementing
Country-by-Country
Reporting
Shane Wallace and Jessica Hayes
William Fry Tax Advisors / Taxand
BEPS Action 13, on Country-by-Country Reporting, has been one
of the first to see widespread adoption across the OECD and
beyond. However, the EU has moved a step further, converging it
with its own tax transparency initiatives, a strategy that is not
without its flaws. The following article reviews the CbCR landscape
in the EU and considers the pitfalls.
Under BEPS, the global tax landscape for mul-
tinational companies is subject to fundamen-
tal reform, the principles of which have been
substantially agreed by over 60 OECD Member States.
One of the fundamental pillars of the BEPS project
is to ensure that the global activities of companies are
more transparent to tax authorities worldwide. At this
stage, the OECD has reached agreement on the frame-
work for transparency measures and has published its
recommendations in Action 13 (Transfer Pricing
Documentation and Country-by-Country reporting).
The focus now is on implementing these principles
into domestic legislation.
The EU has also been playing a key role in ensuring
a coordinated and consistent approach is taken with
regard to the implementation of BEPS across the EU
Member States.
Shane Wallace is
a partner and Jes-
sica Hayes is a tax
consultant at Wil-
liam Fry Tax
Advisors/Taxand.
07/16 Tax Planning International European Tax Service Bloomberg BNA ISSN 1754-1646 7
07/16 Tax Planning International European Tax Service Bloomberg BNA ISSN 1754-1646 7

3. This article focuses on Action 13 and looks at the
EU drive towards greater tax transparency as a result
of the published OECD guidelines and recommenda-
tions.
I. Action 13—What has the OECD Recommended
for Regarding Country-by-Country Reporting
(‘‘CbCR’’)?
Action 13 aims to analyze transfer pricing documenta-
tion and develop rules regarding requisite transfer
pricing documentation to enhance transparency for
tax administrations. It centres around the idea that
the effective implementation of the arm’s length prin-
ciple is closely linked to the availability of informa-
tion. For this reason, the BEPS Action Plan reiterates
the need for enhanced transparency in general, and
for transfer pricing purposes in particular.
The rules introduced under Action 13 require large
multinational groups to provide relevant tax authori-
ties with information on their global allocation of the
income, economic activity and taxes paid among
countries in accordance with a common template.
This is what is now known as country-by-country re-
porting (‘‘CbCR’’).
CbCR requirements became effective from January
1, 2016 and will be one of the earliest tasks that tax-
payers will face in getting to grips with the BEPS
package. Many countries, including Ireland, have al-
ready introduced domestic legislation implementing
the CbCR measures.
The OECD released an Implementation Package for
CbCR on June 8, 2015 which consists of model legisla-
tion requiring the ultimate parent entity of a multina-
tional group to file the CbCR report in its jurisdiction
of residence, including back up filing requirements
where that jurisdiction does not require filing. The
package also includes model competent authority
agreements to facilitate the exchange of CbCR infor-
mation among tax administrators. The model agree-
ments are based on the Multilateral Convention on
Administrative Assistance in Tax Matters, bilateral tax
conventions and Tax Information Exchange Agree-
ments (‘‘TIEAs’’).
It is clear that in developing the framework for
CbCR the OECD recognized and respected the need to
protect taxpayer confidentiality and restricted the re-
porting requirements to tax administrators.
II. What Steps have been Taken by the EU in Line
with Action 13 to Encourage Greater Tax
Transparency across Europe?
1. On January 28, 2016, the EU Commission pre-
sented its EU ‘‘Anti-Tax Avoidance Package’’
(‘‘ATAP’’). This was introduced following the EU
agenda as set out under the June 2015 Action Plan.
It includes a series of provisions designed to create
a stronger and more coordinated EU stance against
corporate tax abuse within the Single Market.
2. On April 12, 2016 the EU announced its intention to
amend to Council Directive (2013/34) (‘‘Accounting
Directive’’) to extend CbCR so that the information
would be made publicly available.
3. On May 27, 2016 Directive 2016/881 was signed
into law which amended the 2011 Directive on Ad-
ministrative Cooperation to include CbCR for tax
authorities in accordance with ATAP.
III. Tax Transparency Measures Proposed under
the EU Anti-Tax Avoidance Package (‘‘ATAP’’)
A. Country-by-Country Reporting (‘‘CbCR’’)
The main item on the agenda under ATAP was CbCR
between tax administrators, which has now been in-
troduced under the amendment to the Administrative
Cooperation Directive which was signed into law on
May 27, 2016.
Key tax related information regarding multina-
tional companies operating in the EU will be ex-
changed among tax authorities under this initiative.
This information will provide Member States with the
necessary information to better target their tax audits
and identify tax avoidance schemes in place. The co-
ordinated approach is to be welcomed and the mea-
sures under this Directive follow closely the
requirements of OECD Action 13.
It is thought that such tax transparency measures
should serve to deter multinationals from engaging in
aggressive tax planning schemes. It advances the tax
transparency agenda with a proposal for CbCR among
tax authorities so that all Member States have the in-
formation needed to ensure fair taxation across
Europe.
The extension of CbCR to be made publicly avail-
able was not initially included in the ATAP draft direc-
tive for CbCR. The proposal to introduce public CbCR
was announced on April 12, 2014 and goes beyond the
recommendations of Action 13, which only requires
CbCR information to be exchanged between tax au-
thorities. As mentioned above, consistency amongst
EU Member States is to be welcomed. However, it is
equally important that the EU works in harmony with
the OECD. There is no indication that other countries
are considering public CbCR and this additional re-
quirement causes inconsistency and could negatively
impact the competitiveness of the EU.
B. List of Third Countries
Another measure included under the tax transparency
provisions proposed under ATAP is the update of the
consolidated information on Member States’ lists of
third countries for tax purposes. This is essentially a
measure to allow blacklisting of noncompliant coun-
tries. The idea is to provide clarity around Member
States’ diverse listing processes and to present na-
tional lists more transparently for businesses and in-
ternational partners.
This is a tool designed to deal with third countries
that refuse to respect good tax governance principles,
when all other attempts to engage with these coun-
tries have failed. It is intended that this will allow the
EU to act as a united block to deal with problematic
third countries that refuse to respect global good tax
governance standards.
The External Strategy under ATAP states that
Member States should apply common sanctions
against third countries on the EU list. These sanctions
should serve as an impetus for the third country to im-
prove its tax system via information exchange mea-
sures and also protect Member States tax bases in the
meantime.
IV. What Information must be Disclosed under
CbCR?
The information to be disclosed pursuant to Action 13
is as follows: name, nature of activities, location, list
of subsidiaries of the parent enterprise operating in
each country, revenue, revenues split between related
8 07/16 Copyright ஽ 2016 by The Bureau of National Affairs, Inc. TPETS ISSN 1754-1646

4. and unrelated parties, number of employees, profit or
loss before tax, income paid and accrued, stated capi-
tal, accumulated earnings, tangible assets.
It is also proposed to include further information,
for example, an explanatory narrative containing in-
formation on tax-related information.
V. Who Does CbCR Apply to?
The requirements set out under the Directive of May
27, 2016 follow the approach set out under Action 13
and the OECD Implementation Package.
Multinational companies (‘‘MNCs’’) with a global
turnover of 750 million euros or more must prepare a
CbC report, providing information on their global
footprint and this must be shared with tax authorities.
The intention (as provided by the OECD) is that the
MNC parent will file the CbCR with the tax authorities
in their country of residence. In certain circumstances
the parent may choose to nominate another group
company (known as a surrogate) to file the CbCR on
behalf of the group. Where this happens the report is
to be filed in the surrogate’s country of tax residence.
Where it is the case that the parent company does not
file a CbCR report (either due to failure or where
CbCR legislation is not in place in the parent’s coun-
try) a tax authority may request a local subsidiary to
file the CbCR. This is referred to as the secondary
mechanism.
VI. What is Public CbCR?
Public CbCR proposes that large multinational com-
panies who are required to provide CbCR information
to tax authorities must also publicly disclose this in-
formation. The CbCR information would be made
available to the public via the company’s website. The
proposal also indicates that they may be required to
file those reports with the relevant national business
registers (i.e. the Companies Registration Office),
which are also accessible to the public. The proposed
directive must now be approved by a simple majority
in the EU Parliament and then by a qualified majority
in the EU Council.
VII. What’s Europe’s next step?
In June 2015, the Commission presented a plan to re-
launch the Common Consolidated Corporate Tax Base
(‘‘CCCTB’’). This was announced in the Action Plan for
Fair and Efficient Corporate Taxation. The idea of this
is to protect the tax base and ensure tax is paid in the
location in which profits are actually generated.
On June 21, 2016 the EU Council reached an agree-
ment on the Anti-Tax Avoidance Directive in accor-
dance with ATAP. The next step is for the EU Council
to adopt the draft directive with changes agreed by fi-
nance ministers, later this year, and for all EU
Member States to adopt it into law by December 31,
2018, becoming effective January 1, 2019.
The main provisions under the draft directive in-
clude the following areas designed to ensure effective
taxation across Europe:
s Controlled Foreign Company (‘‘CFC’’) rules;
s Exit Tax;
s limitation of interest deductions among group
members;
s hybrids—preventing companies from exploiting na-
tional mismatches to avoid taxation; and
s general anti avoidance (‘‘GAAR’’).
VIII. Conclusion
Europe is certainly responding well to the BEPS
Action Plan and the various steps taken in recent
months can be seen as a positive signal that Europe is
serious about implementing the OECD actions at an
EU level. This can be seen as a welcome step in the
right direction in order to encourage greater tax trans-
parency and promote good tax governance through-
out Europe.
There may be a risk, however, that the proposal to
introduce Public CbCR, which demonstrates that
Europe intends on going beyond the provisions of
Action 13, may be problematic and lead to confusion
and lack of competitiveness across Europe. There are
varying views of how Public CbCR would be perceived
by multinational companies operating in Europe
given that Public CbCR would increase compliance
costs and may even damage competitiveness.
Early experience has suggested that most taxpayers
are finding the tasks required to knit the relevant in-
formation together for CbCR somewhat daunting.
There have also been concerns about ensuring the
continued confidentiality of commercially-sensitive
information which may be a risk if public CbCR is in-
troduced. Companies, industry representatives and
indeed representatives of certain EU Member States
have expressed concerns about the publication of tax-
payer information. It will be interesting to see how the
CbCR will be implemented in practice and how the
legislation adopted by the other EU member states
will progress over the next few years.
All in all, one would welcome Europe’s proactive ap-
proach to Action 13. However, with the potential in-
troduction of Public CbCR and the relaunch of the
CCTB one would hope that such measures in Europe
do not dampen Europe’s attractiveness as a location in
which to do business.
Shane Wallace is a partner and Jessica Hayes is a tax consultant at
William Fry Tax Advisors/Taxand. They can be contacted at:
shane.wallace@williamfry.com; and
Jessica.hayes@williamfry.com.
http://www.williamfry.com
OECD presented its final
package for the BEPS
Action Plan
Proposed Amendment to
Accounting Directive to
Extend CbCR information
to be made publicly
available
Signing of the amendment
to the 2011 Directive of
Administrative Cooperation
to include CbCR
information to be made
available for tax authorities
in accordance with ATAP
EU Council reach an
agreement on the
Anti Tax Avoidance
Directive in accordance
with ATAP
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