Global FS tax newsflash: From CRD IV to country-by-country tax reporting for all large companies and groups?

CRD IV: For banks and in place for 2014 — capital management, bonus caps, corporate governance and transparency, including country-by-country tax reporting. There is much about CRD IV that is critical for banks to understand and for financial services to take note of. This Newsflash looks at the country-by-country reporting (and auditing) aspects. What are the implications for banks? Will this spread to other industries outside banking (and even financial services)? Will country-by-country reporting become obligatory for all large companies and groups? In this Newsflash we will provide answers to these questions and give a sense of how we see the politics developing.

On 27 June 2013 the CRD IV Directive (2013/36/EU) was published in the EU’s Official Journal. Publication confirms the timetable for application of its key provisions, including the provision for country-by-country tax reporting for banks.

The CRD IV package was primarily developed to implement “Basel III” into EU law and applies to credit institutions and investment firms (i.e. retail and investment banks) which fall within the scope of the EU MIFID Directive. The CRD IV regulation establishes new prudential requirements and applies directly in all Member States. The Directive must be transposed into the national laws of the Member States by 31 December 2013 (except for certain provisions).

Some Member States have pointed out that under their legal systems it will require at least 12 months (not six) to transpose this directive, so there may still be some transitional measures negotiated.

The CRD IV Directive introduces new EU rules on bankers' remuneration and bonus caps, capital management and enhanced corporate governance and transparency, including country-by-country tax reporting.

Article 89 of the CRD IV Directive stipulates that from 1 January 2015 Member States shall require institutions to disclose by Member State and by third country where they have an establishment, on a consolidated basis for the financial year:

  1. name(s), nature of activities and geographical location;
  2. turnover;
  3. number of employees on a full time equivalent basis;
  4. profit or loss before tax;
  5. tax on profit or loss;
  6. public subsidies received.

Institutions must disclose the information referred to under paragraphs (a), (b) and (c) for the first time on 1 July 2014. By 1 July 2014, all global systemically important institutions authorised within the EU shall submit to the European Commission the information referred to in paragraphs (d), (e) and (f) on a confidential basis. The Commission, after consulting EBA, EIOPA and ESMA, shall conduct a general assessment of potential negative economic consequences of the public disclosure of such information, including the impact on competitiveness, investment and credit availability and the stability of the financial system.