Reviewing the new tax reporting rules for multinational companies

Large companies will be required to reveal their international tax affairs, as part of an ongoing effort to minimise high level corporate tax avoidance. The rules, presented by the European Commission, will affect multinationals that generate £600 million or more in sales, and come after widespread criticism of the use of tax havens following the Panama Papers revelations.

Outlining the new rules

Affected businesses will have to reveal the amounts of tax that they pay on a country-by-country basis, along with any activities undertaken in tax havens. Additionally, large businesses will be made to reveal:

• The nature of any tax activities, and the number of staff that they employ
• Their total net turnover
• Any profits made before tax
• The amount of income tax due, and any tax that has been paid.

These rules will not apply to businesses' trade activities that occur outside of the EU.

Why have these rules been put into place?

According to the EU, European countries lose an estimated £40-56 billion per year in tax revenues as a direct consequence of corporate tax avoidance.

Mining and forestry companies, as well as banks, are already required to abide by country-by-country tax reporting rules.

How many companies will be affected?

The introduction of the new rules for multinational companies will affect 90% of corporate firms operating within the EU. Business groups have expressed concerns that the rules will require them to reveal their profits to both the tax authorities and the general public. 

The rules have also been met with considerable opposition from businesses based within America, who have claimed that the EU is targeting profitable US companies.

The EU's financial services commissioner, Lord Hill, revealed the reasoning behind the decision to implement new rules for large companies, commenting: 'Our economies and societies depend on a tax system that's fair, a principle that applies both to individuals and to business'.

Despite recent high profile cases in the media, the fact remains that sensible tax planning within the law remains an important part of the financial planning strategy for normal businesses and individuals. By making use of the allowances and reliefs that have been made available, you can remain on course to achieve your business and personal goals. We can help you with this process - please contact us for further assistance.