Draft legislation on “Public CbCR” published

On 4 April 2024, the Austrian Federal Ministry of Justice published the consultation draft on the “Austrian Federal Act on the Publication of Country-by-Country Reports (CbCR) on Income Tax Information”. This legislation transposes Directive (EU) 2021/2101 amending the EU Accounting Directive regarding the publication of income tax information by specific companies and branches into Austrian law (see also our newsletter published on this topic).

Goal

In 2016, the Austrian Transfer Pricing Documentation Act (VPDG) introduced an obligation to prepare a country-by-country report (“VPDG CbCR”). While this mainly serves to support tax authorities in risk assessment and is treated confidentially, the publicly available country-by-country report on income tax information (“Public CbCR”) aims at improving the transparency of the activities of multinational enterprises and enhancing public scrutiny. Moreover, the Public CbCR is intended to contribute both to reinforcing companies’ responsibility towards their stakeholders and, to raising public awareness about the scope of reporting obligations and compliance with them.

Scope

1. Temporal scope

For companies in scope, mandatory publication of the Public CbCR is required for all financial years beginning after 21 June 2024 (i.e., if the financial year corresponds to the calendar year, from 2025).

2. Threshold – consolidated revenue in the amount of EUR 750m

Representatives of an ultimate parent company or a standalone company are required to prepare and publish a Public CbCR if their consolidated revenues amount to a minimum of EUR 750m in two consecutive financial years. It is important to note that the Public CbCR is to be prepared in the following year for the latter of the two consecutive financial years in which this threshold is initially exceeded. The reporting obligation ends when, subsequently, the consolidated revenue remains below the threshold in two consecutive financial years.

The following example gives a good overview of the beginning and end of the reporting obligation based on the required revenue threshold.

* This example, which is included in the explanatory notes to the CBCR-VG, does not specify whether it concerns a calendar or non-calendar financial year. However, if it concerned a calendar financial year or if the financial year began before 22 June 2024, no Public CbCR would have to be prepared and published for the financial year 2024 in accordance with Section 17 CBCR-VG.

The published explanatory notes to the draft legislation explain in this regard that for companies domiciled in the EU or the EEA that prepare their financial statements applying IFRS, the revenue threshold should also be calculated in accordance with IFRS. However, companies in the EU or EEA that do not apply IFRS when preparing their financial statements are subject to national legislation for revenue calculation (see section 189a subsec. 5 Austrian Company Code (UGB)).

3. Reporting obligation

a) Ultimate parent company and standalone companies

In general, the obligation to prepare and publish the Public CbCR lies with the representatives of an ultimate parent company in Austria or of a standalone company, which operate at least one of the following business forms in at least one other country: Subsidiary, branch, fixed place of business, permanent business activity.

b) Subsidiaries and branches of ultimate parent companies in non-EU/EEA states

If the requirements for the Public CbCR reporting obligation are met but the ultimate parent company is neither domiciled in the EU nor in the EEA, the representatives of the Austrian subsidiary will be required to prepare the report. For proportionality reasons, according to the EU Directive, the obligation to prepare and publish the Public CbCR will be limited to medium-sized and large subsidiaries as defined in section 221 UGB.

Branches are subject to the reporting obligation if there is no ultimate parent company or subsidiary subject to the reporting obligation domiciled in the EU or EEA and if the branch exceeds the revenue threshold of EUR 10m in the previous two consecutive financial years.

If this information is not available to a subsidiary or branch, or if the information is not provided by the parent company, the representatives of the subsidiary or branch are required to prepare a Public CbCR including all disclosures available to them and submit the Public CbCR including a declaration stating that the parent company did not disclose the required information.

c) Exemption for subsidiaries and branches

The representatives of a subsidiary or a branch are exempt from the obligation to prepare a Public CbCR, if all of the following apply:

• • The ultimate parent company or the standalone company makes a Public CbCR publicly available free of charge on its website in at least one of the EU’s official languages and in an electronic format which is machine-readable no later than 12 months after the relevant reporting date;
  • The report specifies at least one subsidiary or branch domiciled in a member state of the European Union or in a contracting state of the EEA that has published the Public CbCR;
  • The representatives of the subsidiary or branch making use of this exemption have disclosed this information (as well as the internet address of the corresponding website on which the Public CbCR is available and the subsidiary or branch which has published the Public CbCR) to the company register court no later than one year after the end of the respective reporting year.

d) Exemption for credit institutions and investment firms

The reporting obligation does not apply to credit institutions and investment firms whose notes to the financial statements include the list pursuant to section 64 para. 1 subsec. 18 Austrian Banking Act (BWG) or section 17 Austrian Investment Firms Act (WPFG), if these disclosures relate to all activities of the credit institution and, if applicable, of all affiliated companies included in the consolidated financial statements. Representatives of companies making use of this exemption are required to disclose this information to the company register court no later than one year after the end of the respective financial year.

Public CbCR in detail

1. Contents

In addition to general disclosures such as the name of the ultimate parent company or the standalone company, the respective financial year, the currency used in the report as well as, if applicable, a list of all subsidiaries included in the consolidated financial statements and a short description of their activities and the number of staff in FTEs, the Public CbCR must include, in particular, disclosures on income taxes.

The data is to be reported country-by-country. Aggregated data may be reported for activities in non-EU member states not listed in the EU list of non-cooperative jurisdictions for tax purposes.

In order to avoid additional administrative expenses, the legislation includes an option to use disclosures from the VPDG CbCR for the Public CbCR.

2. Language

In general, the Public CbCR is to be submitted in German. For subsidiaries or branches of ultimate parent companies in non-EU/EEA member states, the Public CbCR may also be prepared in English.

3. Submission and deadlines

The representatives of an entity subject to the reporting obligation are required to submit the Public CbCR to the company register court at the registered office of the corporation or branch in an electronic format which is machine-readable no later than 12 months after the end of the reporting year. The report is included in the public archive of documents of the company register and made available to the public free of charge.

Furthermore, the Public CbCR is to be published on the website of the company or branch subject to the reporting obligation for five years and made available free of charge. Alternatively, a reference that the documents are available free of charge via the company register (including a link to the respective site) may be included.

4. Late publication

The draft legislation includes the possibility of late publication (max. 5 years) of one or more specific disclosures in the Public CbCR, if immediate publication of these disclosures would significantly harm the market position of the companies covered by the Public CbCR. However, the draft legislation does not contain any specific examples of cases in which such late publication may be considered. If a company uses this option, it is required to disclose and duly justify this in the Public CbCR.

If it is unclear whether the necessary requirements are met, the company register court will be able to verify this ex officio. If the company register court concludes that the necessary requirements are not met, it can order the publication of the Public CbCR. Furthermore, the company concerned must cover the legal costs as well as make a lump sum cost contribution of up to EUR 20,000.

5. Role of the auditor

The auditor is required to state in the auditor’s report whether the company was required to publish a Public CbCR for the previous financial year and, if so, whether said Public CbCR was published. This means that the legislation only provides for a formal check regarding the disclosure of information by the auditor, but not an examination of its contents.

6. Penalties

The draft legislation includes penalties in order to enforce timely, complete and accurate submission of the Public CbCR. Furthermore, other administrative penalties may be imposed. The amount of the penalties depends on various factors (e.g., in the case of failure to publish on the website, the size of the company, the severity of the misconduct, public interest, etc.) up to a maximum of EUR 100,000 each.

The explanatory notes to the draft legislation make clear that the maximum late submission penalty will only be imposed upon first request or payment reminder in cases of severe violations. The example is given of a company which, despite clear indications, has not published a report for several years.

Conclusion

The transposition of the Public CbCR into domestic law is a further significant milestone in the age of tax transparency. While the VPDG CbCR is intended to enable risk assessment for tax authorities, the Public CbCR makes essential tax information accessible to the general public.

The draft legislation largely complies with the EU Directive. Although some items require more detailed explanations, due to the short consultation period no major changes are expected.

In any case, companies would be well-advised to address the preparation of data and of the Public CbCR proactively in the near future, and to also to monitor the equivalent implementation in other countries. In this context, it may be worth considering including an explanation of the tax strategy in the Public CbCR in order to prevent misinterpretations. We are here to assist you with any inquiries or concerns you may have.