Large multinational corporations will soon be obligated to disclose their profit tax contributions per state. Dutch law was updated in 2023, in accordance with the EU Directive regarding disclosure of income tax information by certain undertakings and branches. A draft Decree with detailed implementation rules was published on 1 March 2024. In this article, our experts outline the new legislation and the key components of the draft Decree.
Objective: transparency and responsible conduct
The European Commission is actively addressing the issues of tax evasion and aggressive tax planning. This EU Directive is the next step in this process. The primary objective of this mandatory disclosure is to ensure transparency concerning the global taxation practices of multinational corporations. Additionally, the rules are designed to promote responsible fiscal conduct, ensuring that these entities contribute taxes in the regions where they conduct business and generate profits.
Scope of the obligation: large multinationals
This legislation is applicable to companies operating across multiple jurisdictions, with a net turnover surpassing € 750 million. This includes:
multinational corporations with ultimate parent entities headquartered in the Netherlands and net profits of € 750 million or more;
internationally operating Dutch companies that generate a stand-alone profit of € 750 million or more but are not part of a group;
medium-sized and large subsidiary entities that are established in the Netherlands, if their parent company is established outside the EU and the consolidated group turnover exceeds € 750 million;
branches (with turnover exceeding € 15 million) which are an integral part of a large multinational group that is not headquartered in the European Union.
Annual reports: taxes and detailed descriptions
Companies that fall within the scope of this legislation must file a separate report on profit tax figures. This should provide insight into the amounts of taxes paid in the countries in which the group operates. The report must be accompanied by a description of the company's operations, which should include amongst others the following details:
number of employees;
revenues;
overall profits.
This information must be reported separately for each EU member state and any jurisdiction identified by the EU as a non-cooperative country (tax haven). For all other countries, aggregation of data is permitted. The European Commission will provide a reporting model and a machine-readable format for electronic reporting, specifying how the information should be reported.
The reports will be made publicly accessible through the Chamber of Commerce. Furthermore, the report should also be made available on the website of the company for a period of five years.
Implementation and reporting deadlines
This mandatory reporting requirement applies to financial years commencing on or after 22 June 2024. The report should be published within twelve months after the book year ends. Consequently, affected entities for which the calendar year and book year are the same must publicly disclose their first report no later than December 31 2026, encompassing the book year 2025.
Non-compliance and penalties
As this legislation concerns the implementation of an EU Directive, similar obligations are expected to apply in other EU member states. For Dutch companies subject to the mandatory disclosure, failure to comply with these regulations constitutes an economic offence, punishable by a fine of € 25,750 (2024) or a prison sentence of up to six months.
Preparation and support
It is not expected that the definitive Decree will differ significantly from this draft, although amendments may yet occur. Please be sure to determine whether your company falls within the scope of these new rules and what steps should be taken to ensure the availability of the relevant data and timely compliance. Should you have any questions or require further clarification or assistance, please do not hesitate to contact our experts.
The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.
