European Commission Publishes the Proposal for the Regulation of Tax Reporting of MNEs

On October 28, the European Commission published a proposal for the ninth revision of the Directive on Administrative Cooperation (DAC9) to implement the Organisation for Economic Co-operation and Development’s (OECD’s) Global anti-Base Erosion (GloBE) Information Return.

The DAC9 proposal aims to ensure a global minimum level of taxation for multinational enterprise groups (MNEs) and large-scale domestic groups (LSDGs) in the EU. The DAC9 proposal is a part of the Pillar 2 Directive, which establishes how MNEs fulfill their filing obligations with as less administrative burden as possible.

The update will require multinational enterprises (MNEs) to report certain tax information via top-up tax (used to achieve the obligatory minimum 15% tax rate for MNEs) information returns at a central level, with 2024 as the first reporting year. The first reporting deadline is set at June 30, 2026. To this aim, a special form, as envisaged by Base Erosion and Profit Translation Inclusive Framework of the OECD and the G20, will be introduced.

Main points of the proposal

The amendment aims to transpose the GloBE Information Return (GIR) into EU law, enabling centralized filing via an information return according to Article 44(3) of the Minimum Tax Directive (Council Directive (EU) 2022/2523 of December 14, 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU).

This filing process provides for the following steps:

• Setting up a system of tax information exchange between Member States;

• Introducing a standard form developed by the Inclusive Framework of the OECD and the G20, in which taxpayers will fill in necessary tax information. For the sake of convenience, the form ensures that taxpayers throughout the EU provide the same information in the same format.

Article 44(3) of the Minimum Tax Directive offers to scenarios how entities may file tax information:

• Baseline scenario: each constituent entity must file its Top-up tax information return in the Member State where it is located.

• Derogation: ultimate parent entity (UPE) (or a designated filing entity) files the Top-up tax information return on behalf of the entire MNE.

Proposed amendments to the DAC9

1) Exchange of Top-up tax information returns

Each Member State must require the UPE or designated filing entity of the MNE group located in its territory to file the Top-up tax information return using the new standard template within 15 months after the last day of the consequent reporting fiscal year. For the first Reporting fiscal year, the filing must be done no later than 18 months after the last day of the reporting fiscal year.

The competent authority of the Member State that receives the top-up tax information return must automatically exchange it to other Member States in accordance with the OECD’s dissemination approach. The deadline for this is no later than three months after the filing deadline for that reporting fiscal year or six months for the first year of application.

2) Top-up tax information return correction

If a competent authority of a Member State identifies errors in a top-up tax information return submitted by another Member State, it must notify the competent authority of this other Member State, which in turn must request the filing entity to make corrections. If a return is not exchanged within the deadline, the notified authority must determine the reason for the delay and inform the notifying authority within one month, including the expected exchange date if applicable.

Data in a top-up tax information return

It is proposed to add Annex VII to the DAC9, which describes the reporting rules that apply to the filing entity of the MNE, together with the details of the top-up tax information return.

Section III contains the following data MNEs must provide:

• MNE Group information: general information about the MNE Group and its corporate structure, filing constituent entity and a summary table on the application of the rules in each jurisdiction where the MNE operates.

• Jurisdictional safe harbors and exclusions: information for each jurisdiction in which the MNE group operates.

• Computations: qualifying income adjustments, details of adjusted covered taxes, top-up tax allocations where applicable.

Next steps

The proposal of the European Commission will now go through the consultation with the European Parliament and requires unanimous agreement of all 27 EU Member States for the adoption. Since first top-up tax information reports need to be filed by June 30, 2026, Member States shall transpose corresponding provisions into national legislations by December 31, 2025.

The European Commission is also expected to adopt an act to introduce standard computerized forms for the automatic exchange of tax information.

Sources:

Press release of the European Commission

Text of DAC9