(July 12, 2015)
On July 8, 2015 the European Parliament voted on a proposed revision on the shareholders’ rights Directive as well as on a proposed revision of Directive 2013/34/EU of June 26, 2013 (on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings) and a proposed revision of Directive 2004/109/EC of December 15, 2004 (on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC). The text, as amended by the European Parliament, was approved by 556 votes to 67, with 80 abstentions. According to a press release issued, the Members of European Parliament decided not to close the first reading, but instead to enter into informal talks with member states with a view to seeking agreement on the final version of the legislation.
Below we will highlight some of the proposed amendments intended to increase tax transparency.
Amendments proposed with respect to Directive 2013/34/EU
First of all it is proposed to add a new point 17 to Article 2 (“Definitions”) of the Directive. The proposed point contains the following definition of a tax ruling:
'tax ruling' means any advance interpretation or application of a legal provision for a cross-border situation or transaction of a company which might lead to a loss of tax in Member States or which might lead to tax savings for the company resulting from artificial intra-group transfers of profits.
Furthermore it is proposed to include the following paragraph 2a after paragraph 2 of Article 18 (“Additional disclosures for large undertakings and public-interest entities”) of the Directive:
“2a. In the notes to the financial statements large undertakings and public-interest entities shall also disclose, specifying by Member State and by third country in which they have an establishment, the following information on a consolidated basis for the financial year:
(a) name(s), nature of activities and geographical location;
(b) turnover;
(c) number of employees on a full time equivalent basis;
(d) value of assets and annual cost of maintaining those assets;
(e) sales and purchases;
(f) profit or loss before tax;
(g) tax on profit or loss;
(h) public subsidies received;
(i) parent companies shall provide a list of subsidiaries operating in each Member State or third country alongside the relevant data.”
It is also proposed to replace the current text of paragraph 3 of Article 18 of the Directive by the following:
“Member States may provide that point (b) of paragraph 1 and paragraph 2a are not to apply to the annual financial statements of an undertaking where that undertaking is included within the consolidated financial statements required to be drawn up under Article 22, provided that that information is given in the notes to the consolidated financial statement.”
Furthermore it is proposed to include a new article 18a in the Directive:
“Article 18a
Additional disclosure for large undertakings
1. In the notes to the financial statements, large undertakings shall, in addition to the information required under Articles 16, 17, 18 and any other provisions of this Directive, publicly disclose essential elements of and information regarding tax rulings, providing a break-down by Member State and by third country in which the large undertaking in question has a subsidiary. The Commission shall be empowered to set out, by means of delegated act in accordance with Article 49, the format and content of publication.
2. Undertakings of which the average number of employees on a consolidated basis during the financial year does not exceed 500 and which, on their balance sheet dates, have on a consolidated basis either a balance sheet which does not exceed a total of 86 million euros or a net turnover which does not exceeds 100 million euros shall be exempt from the obligation set out in paragraph 1 of this Article.
3. The obligation set out in paragraph 1 of this Article shall not apply to any undertaking governed by the law of a Member State whose parent undertaking is subject to the laws of a Member State and the information of which is included in the information disclosed by that parent undertaking in accordance with paragraph 1 of this Article.
4. The information referred to in paragraph 1 shall be audited in accordance with Directive 2006/43/EC.”
Amendments proposed with respect to Directive 2004/109/EC
With respect to Directive 2004/109/EC the following amendments are proposed:
In paragraph 1 of Article 2 (“Definitions”) of the Directive the following point (r) is added:
'tax ruling' means any advance interpretation or application of a legal provision for a cross-border situation or transaction of a company which might lead to a loss of tax in Member States or which might lead to tax savings for the company resulting from artificial intra-group transfers of profits.
Furthermore it is proposed to insert the following articles 16a and 16b:
"Article 16a
Additional disclosure for issuers
1. Member States shall require each issuer to annually publicly disclose, specifying by Member State and by third country in which it has a subsidiary, the following information on a consolidated basis for the financial year :
(a) name(s), nature of activities and geographical location
(b) turnover
(c) number of employees on a full-time equivalent basis
(d) profit or loss before tax
(e) tax on profit or loss
(f) public subsidies received
2. The obligation set out in paragraph 1 shall not apply to any issuer governed by the law of a Member State whose parent company is subject to the laws of a Member State and of which the information is included in the information disclosed by that parent company in accordance with paragraph 1.
3. The information referred to in paragraph 1 shall be audited in accordance with Directive 2006/43/EC and shall be published, where possible, as an annex to the annual financial statements or, where applicable, to the consolidated financial statements of the issuer concerned.”
“Article 16b
Additional disclosure for issuers
1. Member States shall require each issuer to publicly disclose annually, on a consolidated basis for the financial year, essential elements of and information regarding tax rulings, providing a break-down by Member State and by third country in which it has a subsidiary. The Commission shall be empowered to set out, by means of delegated acts in accordance with Article 27(2a), (2b) and (2c), the format and content of publication.
2. The obligation set out in paragraph 1 of this Article shall not apply to any issuer governed by the law of a Member State whose parent company is subject to the laws of a Member State and whose information is included in the information disclosed by that parent company in accordance with paragraph 1 of this article.
3. The information referred to in paragraph 1 shall be audited in accordance with Directive 2006/43/EC and shall be published, where possible, as an annex to the annual financial statements or, where applicable, to the consolidated financial statements of the issuer concerned."
For further information click here to be forwarded to the text of the Directive on which the European Parliament voted on July 8, 2015.
Click here to be forwarded to the press release “Corporate governance: MEPs vote to enforce tax transparency” as issued by the European Parliament on July 8, 2014.
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