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Executive summary

The Netherlands has implemented the EU Public Country-by-Country Reporting Directive¹ (Directive) as part of the Dutch legal framework for financial and nonfinancial corporate reporting. Specifically, this implementation was accomplished through the law of 6 December 2023² (implementing Law), published on 29 December 2023, and implementing Decree of 14 February 2024³ (implementing Decree), published on 1 March 2024.

According to the Directive, EU-headquartered multinational enterprises (EU MNEs) and non-EU-headquartered MNEs doing business in the EU through a qualifying branch or medium and large subsidiary undertakings (non-EU MNEs), with total consolidated (group) revenue exceeding €750m in each of the last two consecutive financial years, must publicly disclose the income taxes paid and other tax and non-tax related information, such as a breakdown of profits, revenues and employees per jurisdiction (for the EU and the EU list of noncooperative jurisdictions for tax purposes, with all other jurisdictions aggregated as "Rest of World").

The Dutch implementing Decree contains the details of the new Public Country-by-Country Report (PCbCR) obligation in the Netherlands, and closely follows the content of the Directive. The implementing Decree also contains an explanatory note that provides more background, considerations and guidance on certain topics.

The Netherlands opted to allow in-scope MNEs to defer, if conditions are met, the disclosure of commercially sensitive information for up to five years.

The Netherlands did not opt to provide an exemption from website publication.

The implementing Law and Decree require that covered EU MNEs publish their PCbCR for book-years starting on or after 22 June 2024 at the Chamber of Commerce in the Netherlands, and make the PCbCR publicly available on their website, if the groups' ultimate parent entity (UPE) is located in the Netherlands.

The implementing Law and Decree also require that medium- and large-sized subsidiary undertakings and qualifying branches in the Netherlands of covered non-EU MNEs publish their PCbCR for book-years starting on or after 22 June 2024 in the Netherlands and make the PCbCR publicly available on their website. An exemption applies if the non-EU UPE voluntarily publishes its PCbCR on its website and appoints one of the covered EU subsidiary undertakings or qualifying branches to publish and make the PCbCR publicly available within the EU.

Affected MNEs with total consolidated (group) revenues exceeding €750m and operating in the EU should prepare for compliance with the PCbCR obligation and continue to monitor implementation developments in other EU Member States.

Detailed discussion

Background

The Directive⁴ entered into force on 21 December 2021 and required transposition into national legislation by the Member States by 22 June 2023. It introduced a new mandatory requirement for covered MNEs doing business in the EU to publicly disclose income taxes paid and other tax and non-tax related information. This information must be published on a jurisdictional basis for all 27 EU Member States and for all jurisdictions listed in the EU list of noncooperative jurisdictions for tax purposes.⁵ For all other jurisdictions, it is sufficient to disclose the information as an aggregated total for Rest of World.

The Directive has European Economic Area (EEA) relevance, meaning that it is expected (1) Liechtenstein, Norway and Iceland will also introduce PCbCR legislation, (2) MNEs with an UPE in these countries will be classified as an EU MNE by the EU Member States, and (3) information in the PCbCR relating to Liechtenstein, Norway and Iceland will also need to be broken down per jurisdiction. Local implementation of the Directive into national law may provide confirmation or clarifications on the latter.

Based on the Directive, covered MNEs are EU MNEs, and non-EU MNEs doing business in the EU through a medium- or large-sized subsidiary undertaking or qualifying branch, with total consolidated (group) revenue of more than €750m in each of the last two consecutive financial years.

In general, based on the default timeframes outlined in the Directive, the first financial year of reporting is the year starting on or after 22 June 2024. However, some EU Member States have voluntarily chosen to apply the rules earlier, most noticeably Romania (with the first year of reporting starting on or after 1 January 2023), and Croatia (with the first year of reporting starting on or after 1 January 2024). MNEs active in these jurisdictions should act soon to ensure timely compliance.

The information to be disclosed in the PCbCR under the Directive includes:

For EU MNEs, the EU-based UPE is responsible for filing the PCbCR with the commercial registry and for having it published on its website. For non-EU MNEs, the PCbCR must be filed and published by each of the medium and large subsidiaries and qualifying branches in the EU. An exemption could apply when the non-EU UPE publishes a PCbCR on its website voluntarily and appoints one EU subsidiary undertaking or qualifying branch to file and publish in the EU.

The Directive contains an optional safeguard clause (deferral for disclosure of commercially sensitive information) and an optional website publication exemption (applicable if the commercial registry already makes the filed report available for free on its website).

The PCbCR would generally need to be filed and published within 12 months after the balance sheet date for the relevant financial year. Some countries, however, have voluntarily opted for a shorter publication deadline, such as Spain (six months) and Hungary (five months).

Given the optional clauses in the Directive and the local nuances in national legislation, EU MNEs and especially non-EU MNEs will need to closely monitor implementation by the different EU Member States to comply with specifics of the countries where they operate.

Implementing the Directive in domestic law in the Netherlands

The Dutch implementing Law rearranges the delegation bases for regulations on the content of management reports and separate reports in Book 2 of the Dutch Civil Code. As a result, only a Decree (an "algemene maatregel van bestuur," in Dutch) will be necessary to further implement the Directive as part of the Dutch corporate reporting rules, and to implement other directives such as these more quickly in the future.⁶

The Dutch implementing Decree contains the details of the new PCbCR obligation in the Netherlands, and closely follows the content of the Directive. The implementing Decree consists of the following:

• Article 1 — Definitions
• Article 2 — Reporting by a Dutch UPE of a covered EU MNE
• Article 3 — Reporting by a Dutch qualifying undertaking of a covered non-EU MNE
• Article 4 — Reporting by a Dutch qualifying branch of a covered non-EU MNE
• Article 5 — Exemption to article 3 and 4 in case the non-EU UPE voluntarily publishes a PCbCR
• Article 6 — Provision of the PCbCR information by the UPE to the art. 3 and 4 reporting entities
• Article 7 — Report content, option to reflect the information in line with BEPS Action 13 CbCR
• Article 8 — Countries for which the information must be reflected on a jurisdictional level
• Article 9 — Safeguard clause (deferral for disclosure of commercially sensitive information)
• Article 10 — Currency of the report
• Article 11 — Reporting deadline, publication term, format of the report, enforcement
• Article 12 — Accountant statement
• Article 13 — Minor adjustment in other decree
• Article 14 — Minor adjustment in other decree
• Article 15 — Date of entry into force⁷
• Article 16 — Reference name of the Decree

The implementing Decree also includes an explanatory note with more background information, considerations and guidance, article-by-article commentary and a transposition table.

General rules under the Dutch implementing Decree

As mentioned, the Dutch implementing Decree closely follows the content of the Directive.

Reporting entities (in line with the Directive)

The Dutch PCbCR obligation applies for:

• A UPE in the Netherlands of an EU MNE that has consolidated (group) revenue on two consecutive balance sheet dates, without interruption subsequently on two consecutive balance sheet dates, according to its consolidated financial statements exceeding €750m (article 2 par. 1a)
• A standalone enterprise with total revenue on two consecutive balance sheet dates exceeding €750m (article 2 par. 1b)
• A Dutch medium-sized or large subsidiary undertaking, defined by the Dutch size criteria, ⁸ controlled by a UPE that is not governed by the laws of an EU or EEA Member State, where the consolidated (group) revenue exceeds €750m on two consecutive balance sheet dates (article 3)
• A Dutch qualifying branch with net turnover on two consecutive balance sheet dates exceeding the Dutch size criterium,⁹ established by a UPE that is not governed by the laws of an EU or EEA Member State, where the consolidated (group) revenue exceeds €750m on two consecutive balance sheet dates and there is no medium-sized or large subsidiary undertaking as defined above (article 4 par. 1)

The PCbCR requirements do not apply to a UPE and its group companies or to a stand-alone company if such companies, including their qualifying branches, are exclusively established or have only a permanent establishment or permanent business activity in the Netherlands (article 2 par. 2).

To prevent duplicative reporting, Dutch UPEs or standalone enterprises that are banks or investment firms and already report similar information¹⁰ are exempt from publishing a PCbCR under this implementing decree (article 2 par. 3).

First reporting year, deadline, publication term and compliance details (in line with the Directive)

• The implementing Decree applies to PCbCRs prepared for fiscal years beginning on or after 22 June 2024 (article 15 par. 2).
• The PCbCR shall be made public within 12 months after the end of the financial year, by filing it with the company register ("Handelsregister" in Dutch) of the Dutch Chamber of Commerce (article 11, par. 1) and making it available on the website (article 11, par. 1-2).
• The PCbCR shall remain accessible on the website for at least five consecutive years (article 11, par. 3). Note, that the retention period for information filed with the Dutch Chamber of Commerce is seven years, which also applies for the PCbCR.¹¹

The European Commission has not yet released for public consultation the draft technical standards and forms for the PCbCR. Therefore it is not yet known what the final PCbCR will ultimately look like. Once the European Commission releases the standards and the forms, the compliance process and technology requirements will become clearer. In due time it will also become clearer whether and how governments will provide further localized guidance or allow access to a knowledge group for support with technical issues and practical application questions.

Content of the report (in line with the Directive)

Based on the implementing Decree, the required content and data to be reflected in the PCbCR is consistent with the Directive requirements as listed above (article 7 par. 2). The implementing Decree provides some guidance (article 7 par. 3-7), for example on how taxes should be reflected, and it provides some detail on definitions (e.g., for the term "revenue," allowing reference to the Dutch Civil Code (article 2:377 on the composition of the profit and loss account) or to the applied financial reporting framework (article 1 par. 2 and article 7 par. 2d)).¹²

The Dutch reporting entity may opt for either reporting the PCbCR information in line with the definitions provided in the implementing Decree (and in the Directive) or applying the CbCR guidance already included in Annex A and the guidance on Table 1 included in the explanatory note to the Dutch Transfer Pricing documentation decree¹³ (article 7 par. 8). The PCbCR must indicate which approach has been followed (article 7 par. 9).

The information in the PCbCR must be reflected separately for each EU Member State, each EEA country (Liechtenstein, Norway and Iceland), and each jurisdiction listed in the EU list of noncooperative jurisdictions for tax purposes (EU blacklist and EU grey list). For all other jurisdictions, information is reflected as an aggregated total for Rest of World (article 8 par. 1 and 2).

If a non-EU UPE fails to provide all required information, the medium-sized or large subsidiary undertaking or qualifying branch in the Netherlands must compile and publicly disclose a PCbCR with all available information, including a statement indicating the failure of the UPE to provide the necessary data (article 6).

The implementing Decree adopts the so-called "safeguard clause" option from the Directive. Article 9 allows the omission of one or more items of information required to be disclosed in the PCbCR if disclosure harms the company's competitive position. These omissions must be clearly marked and justified in the PCbCR. Omitted details must still be disclosed in a PCbCR within five years from the initial omission. The safeguard clause cannot be applied to jurisdictions from the EU list of noncooperative jurisdictions for tax purposes.

The implementing Decree does not adopt the so called "website publication exemption," which would allow an exemption from publishing the PCbCR on the company's website if the PCbCR would be made available free of charge on the website of the Chamber of Commerce. The Dutch Chamber of Commerce charges administrative fees for access to commercial register information and the website publication exemption would hence not be consistent with this existing regime.¹⁴

Some clarifications provided in the explanatory note to the implementing Decree

Although the Directive, unlike the BEPS Action 13 report, only provides limited further guidance on the required data mapping into the PCbCR datapoints, the Dutch explanatory note to the implementing Decree provides some interesting clarifications and insights into the Dutch approach on various practical reporting details.

For example, the explanatory note clarifies that:

• If an MNE at first is in scope of the PCbCR rules and applies the safeguard clause in its PCbCR by omitting certain information, but subsequently falls below the €750m revenue threshold for two consecutive years and thus no longer has a reporting obligation, a PCbCR still must be published disclosing the previously omitted information within the maximum five-year period for deferral. Such PCbCR would then only include the previously omitted information (par. 1 of commentary to article 9).
• Failure to comply with PCbCR obligation is an economic offense. Applicable relevant penalties are further outlined in the Economic Offenses Act or "Wet op de economische delicten."¹⁵ Furthermore, if a Dutch reporting entity fails to meet its publication requirements, any interested party may demand compliance and can request the Ondernemingskamer (Enterprise Chamber) of the Court of Appeal Amsterdam to instruct the entity to fulfil the obligations.¹⁶
• Unless the European Commission indicates otherwise when issuing the common format and template, nonresident entities (stateless entities) are reported as a part of the aggregated information for "Rest of World" (par. 4 of commentary to article 8).

PCbCR in the wider context of sustainability, public tax transparency and societal impact

PCbCR is part of a growing tax transparency movement. Various stakeholders, including corporate board members, employees, regulators, tax authorities, investors, nongovernmental organizations (NGOs), knowledge parties and the general public are taking a greater interest in tax, looking at tax as a business's contribution to society, and requiring strong governance and risk control for tax through increasingly transparent reporting requirements. PCbCR may already be, or considered to be, included in a separate report or as part of a group's existing financial or nonfinancial public reporting, if tax is considered a material topic (e.g., applying the tax standard GRI 207, or the Dutch VNO-NCW Tax Governance Code).

Implications

MNEs with total consolidated (group) revenues exceeding €750m and operating in the EU should prepare for compliance with the PCbCR obligation and continue to monitor implementation developments in other EU Member States.