Episode Transcript
[00:00:00] Speaker A: Foreign.
Hello everyone and welcome to our podcast series A and M Text Tax Policy Updates where we bring your insights into the latest developments in global tax policy and controversy matters. This is Andrea Croes speaking. I am a Managing Director in the Transfer Pricing and Tax Technology practice of A and M, based out of Munich, Germany.
I've been working in the field of tax technology and CPCR for more than 10 years, providing advisory tax services related to country by country reporting, in short, the cpcr, and on the other hand, in overseeing the development and implementation of tax and finance tools.
I have been deeply involved in the CPCR topics since the initial implementation of OECD's non public CPR in 2017.
I'm joined today by Janita hi everyone,
[00:00:59] Speaker B: my name is Janita Bach and I'm working as an Assistant Director in Andrea's team. I've been working in the same field for many years.
In today's podcast we'll be looking at the new EU Obligation Andrea, tell us why today 30th of June is so important.
[00:01:20] Speaker A: June 30th, 2026 is an important date because for some groups it marks the first major deadline for EU Public CPCR publication and disclosure.
Under the EU rules, the obligation applies to financial years starting on or after June 22nd in the year 2024, as the report must generally be published and disclosed within 12 months after the financial year end. A group with a financial year ending on June 30, 2025 would have to publish and disclose its first EU public CPCR report by today.
And just as A side note, June 30, 2026 is also relevant for Australian Public CPCR for Australia. We refer listeners to the separate podcast by our Australian colleagues David Litos and Josh Johnson, published on November 18, 2025 in this podcast series.
But today we will focus on the EU regulations.
[00:02:26] Speaker B: But before we go into the details, let's briefly set out what we'll cover today.
First, we'll start with the scope of the EU Public CBCR so who is affected.
Then we look into the financial data that needs to be reported, followed by publication and disclosure requirements. After that we'll discuss a safe court clause and potential payment penalties. And finally, we'll close with some additional considerations that companies should keep in mind.
So Andrea, let's start with the first point. Who is in scope for the EU Public cbcr?
[00:03:09] Speaker A: In line with the EU Accounting Directive, the EU Public CPCR rules apply to multinational groups with consolidated revenue of more than 750 million euro in two consecutive financial years for EU or EEA headed groups. The analysis is relatively straightforward.
If the ultimate parent company is based in the EU or EEA and the revenue threshold is met, the group may be in scope if further conditions are met. And just as a reminder, the EEA countries are Norway, Iceland and Liechtenstein.
But it is important to note that the rules can also apply to groups headquartered outside the EU or eea, for example US headed or UK headed groups. These groups may be in scope if they perform material business within the EU or eea, so the obligation is not limited to European parent companies.
[00:04:09] Speaker B: Not every EU country adopted the EU directive for EU public CBCR1.1 and there are differences in the legislation in each EU country.
What happens if a group has subsidiaries and perman establishments in more than one EU and EEA country?
How is it decided which law is applicable, especially for non EU headed groups?
[00:04:37] Speaker A: That's an important point, Jani. The key question is whether they have a sufficient presence in the EU or eea, typically through medium sized or large subsidiaries or qualifying branches. For those groups, the first step is to evaluate where they have entities or branches in the EU or EEA and then check the relevant local thresholds regarding the definition of medium sized or large entities and implementation rules in each relevant country.
And in a second step, a medium sized or large subsidiary can be nominated to fulfill the EU public CPCR obligations for the whole group provided that the corresponding exemption provision has been implemented in every other affected country.
[00:05:27] Speaker B: Okay, now I know who must file the public cbcr. Now we should discuss which financial data is included.
Are there any differences to the oec? Non public cbcr?
[00:05:42] Speaker A: The data appears to be the same, but it is slightly different.
It is an option to use non public CPCR data which is highly recommended to avoid additional effort for data collection. Nevertheless, the data is aggregated on a different country level.
First, only revenues, total profit loss before income tax, income tax paid, income tax accrued, accumulated earnings and number of employees are mandatory.
Revenues related and unrelated as well as stated capital and further additional KPIs are optional.
Another difference is the country scope. Financial data is shown for EU and EEA countries as well as countries on the EU black and grey list.
[00:06:28] Speaker B: Which countries do the black and gray list include?
[00:06:32] Speaker A: The relevant list will be updated by the EU twice a year. Currently countries like Russia, Panama, Turkey and Vietnam are included among others.
The financial data for the rest of world countries which include for example China and the US are summed up in one line just for completeness. The country scope for Australian public CBCR
[00:06:55] Speaker B: is different, but not just the country scope deviates. Please tell us about the further differences between the OECD non public CBCR and the EU public CBCR compared to the
[00:07:08] Speaker A: OECD non public cpcr. EU public CPCR is a much broader exercise. It is no longer just about preparing data for tax authorities. The information becomes public.
Companies need to involve more internal stakeholders early in the process, like investor relations, communication and the Supervisory Board. As the Supervisory Board is responsible for the audit of the public CPCR content, that also means the timeline becomes more complex and needs to be planned carefully.
[00:07:41] Speaker B: As we know about the information that needs to be included. Let's discuss the biggest difference. The CBCR goes public.
What does publication and disclosure mean?
[00:07:53] Speaker A: The data must be published and disclosed within 12 months after the fiscal year end. For groups whose fiscal year corresponds to the calendar year 2025 is the first reporting period that needs to be disclosed.
[00:08:09] Speaker B: There are two steps, publication and disclosure. Could you clarify what that means in practice?
[00:08:16] Speaker A: Yes, exactly.
Publication means making the report available on a website, typically the headquarters website, and the disclosure must be made to a company registry within the EU or eea.
[00:08:30] Speaker B: And what about timing? In case of a multinational group headquartered outside of the EU eea, does the nomination of the disclosing entity affect deadlines?
[00:08:42] Speaker A: Yes, and that's the key point to be aware of. If you nominate, for example, a German entity to perform the disclosure, that's perfectly fine and it does not trigger any earlier disclosure requirements in other countries. As Germany adopted the EU directive regarding the disclosing deadline of 12 months, however, there might be important exceptions.
Unlike the EU directive, for instance, Spain requires a period of six months only if the MNE group, headquartered outside EU EA, has only one qualifying Spanish subsidiary. A shorter deadline of six months may apply instead of the standard 12 months.
[00:09:20] Speaker B: Then, before we move on, are there any exceptions or risks companies should be aware of?
[00:09:28] Speaker A: Yes, definitely.
There are two more aspects we should discuss. The Safeguard Clause and the penalties.
First, the Safeguard Clause allows companies under certain circumstances to defer the disclosure of specific sensitive information.
And if disclosing that information would seriously affect the group's economic position, data can be omitted.
Under the EU Directive, this deferral can apply for up to five years.
However, it's important to note that local implementations may differ. For example, again, in Germany, the maximum deferral period is four years instead of the five years.
[00:10:13] Speaker B: So there are still some differences at country level, even though we're talking about an EU directive.
[00:10:20] Speaker A: Exactly. And that's something companies really need to be aware of. Also, using the Safeguard Clause comes with Clear obligations. You can't just omit information without explanation.
You need to explicitly state that you are applying the safeguard clause, explain why certain information is being omitted and ensure that the missing information is disclosed later at the latest, after four or five years, depending on the jurisdiction.
Also, financial data for countries on the EU black and gray list cannot be omitted under the safeguard clause.
[00:10:57] Speaker B: That sounds like something that needs to be managed very carefully.
[00:11:01] Speaker A: Absolutely. Especially because of the penalty regime. The EU directive already encouraged member states to introduce significant penalties and in practice these can be quite substantial.
For example, in Germany, penalties can be up to €250,000 per breach.
[00:11:22] Speaker B: Per breach?
That can add up quickly.
[00:11:25] Speaker A: Exactly. Penalties may arise if the report is not submitted on time, not submitted at all, or incorrect or incomplete.
And it's important to understand that this is not a one off risk. Since the obligation continues over several years, penalties can accumulate over time.
This could create a significant financial risk and clearly shows that regulators want to ensure compliance and discourage non publication.
[00:11:53] Speaker B: And beyond penalties, there's also the public aspect.
[00:11:58] Speaker A: Right?
[00:11:59] Speaker B: So let's move to our final section, additional considerations and look at what companies should keep in mind. Beyond the strict legal requirements, the public
[00:12:11] Speaker A: may be the biggest risk of all. The reputational risk should not be underestimated. Once the data is public, it can be reviewed and interpreted by a wide range of external stakeholders, including media, clients and supplies.
And this is where the risk lies. A lack of knowledge about the specific definitions of the data points can easily lead to misinterpretation.
[00:12:37] Speaker B: So it's not just about compliance, it's also about communication.
[00:12:41] Speaker A: Exactly.
That's why it is strongly recommended not only publishing the mandatory data, but also providing additional context, e.g.
economic explanations at country level, narrative around the tax position and background on the group's business model. This helps to ensure that the data is understood correctly and most importantly, it helps to reduce the risk of misinterpretation.
[00:13:08] Speaker B: For that purpose, an introduction and inclusion can be added.
Besides the early publication of the EU public cbcr, for example Romania and Croatia, there are also existing EU public CBC rules for European banks and for the extractive industries, for example multinational groups in the oil sector.
Looking at these examples can be helpful because they show how companies have dealt with the Public CBC act so far, whether they published only the mandatory information or whether they added further explanations, economic context or a text narrative that helps readers to understand the data and importantly, to avoid misunderstandings or misinterpretations.
How did those reports look like? Was there a lot of information added beyond the minimum obligation.
[00:14:03] Speaker A: We saw a wide range from the bare minimum to a full transparency reporting. The difficulty might be the complex and time consuming preparation process.
[00:14:14] Speaker B: So how did the public react to the first reports?
[00:14:18] Speaker A: For example, transparency analyses have been performed by the public already regarding the content and voluntary information of existing public CPC reports.
But there are different external stakeholders such as shareholders, clients and employees only, to name a few.
All these stakeholders have different interests and scrutinize the reports from another point of view.
So the various perspectives should be taken into account and above all, the information should be coordinated with other publications.
[00:14:50] Speaker B: Thank you, Andrea do you want to highlight something else?
[00:14:54] Speaker A: Yes Just because an EU public CPCR is published and disclosed, the Australian public CPCR obligations aren't fulfilled.
That means the legal requirements of Australia need to be reviewed. Please check out the podcast of our Australian colleagues for more information.
[00:15:14] Speaker B: That brings us to the end of this episode. Thank you for joining us today.
Stay with us as we continue this journey in our upcoming podcasts. Please also check out our monthly newsletter which will bring you the latest key updates around selected editorial pieces from our Global Tax Network.
[00:15:34] Speaker A: And don't forget to follow this channel. There will be regular insights and updates through podcasts coming your way. If you haven't done so yet, subscribe to receive the newsletter directly in your inbox.
Thank you.
