Country-by-country reporting differs from regular financial reporting in that companies have to publish information for every country they operate in rather than providing a single set of information at global level.
Specific rules in the Accounting Directive and the Transparency Directive require mining and forestry companies to use this system to report on the taxes, royalties and bonuses that they pay worldwide.
The Commission has also proposed a new directive that will require large multinational companies to publish country-by-country information on where they make their profits and where they pay tax.
Requirements for extractive and logging industries
Under EU rules, listed and large non-listed companies that are active in the oil, gas, mining or logging sectors have specific reporting obligations.
They must report all payments to governments broken down by country. They must also report by project if these payments have been attributed to a specific project.
Companies must report the following types of payments:
- production entitlements
- taxes on income, production or profits
- signature, discovery and production bonuses
- licence fees, rental fees, entry fees and other considerations for licences and/or concessions
- payments for infrastructure improvements
These rules aim to improve the transparency of payments made to governments all over the world by the extractive and logging industries.
This helps populations of resource-rich countries hold their governments accountable for the exploitation of natural resources, in line with the Extractive Industries Transparency Initiative (EITI). The EITI is a voluntary initiative promoting public awareness of how countries manage their oil, gas and mineral resources.
Proposed tax transparency rules for multinationals
In 2016, the European Commission proposed a directive requiring large multinational companies to publish key information on where they make their profits and where they pay their tax in the EU on a country-by-country basis.
Companies will also have to disclose how much tax they pay on the business they conduct outside the EU. For tax jurisdictions that do not abide by tax good governance standards (so-called tax havens), this information will need to be disclosed on a disaggregated basis.
These additional transparency requirements will apply to any multinational company - whether European or not - that
- is currently active in the EU single market
- has a permanent presence in the EU
- has global revenues exceeding €750,000,000 a year
The proposal builds on the Commission's work to tackle corporate tax avoidance in Europe, which costs EU countries an estimated €50-70 billion a year. It will help to scrutinise the tax behaviour of multinationals. This will in turn push companies to pay tax where they make profit.
The study reviews the country-by-country reporting done by the extractive and logging industries, its implementation, effectiveness and impacts.