The Bundesrat vote is based on the amended version of the law passe by the Bundestag on May 11, 2023. The main purpose of the law is to implement Directive (EU) 2021/2101 amending Directive 2013/34/EU with regard to the disclosure of income tax information by certain companies and branches. According to this directive, income tax information of multinational companies and groups with high turnover that are either resident in the EU or have subsidiaries or branches of a certain size must be made transparent. The reporting of income tax information is to be broken down by member states of the EU and certain other tax jurisdictions in which business activities are carried out (public Country by Country Reporting, or public CbCR for short).
In order to implement such a public CbCR, the following changes in particular to commercial accounting law will be made, which - in accordance with the implementation period of the Directive - are to be applied for the first time for a financial year beginning after June 21, 2024.
Corporations or commercial partnerships within the meaning of Section 264a (1) of the German Commercial Code (HGB) that are domiciled in Germany and ultimate parent companies domiciled in Germany will be required to prepare an income tax information report and disclose it in the company register. This affects companies whose sales revenues or consolidated sales revenues exceed an amount of EUR 750 million worldwide in each of two consecutive fiscal years.
Note: This implies that the obligation to prepare and disclose an income tax information report largely affects the same companies that are already currently required to submit a (non-public) CbCR to the Federal Central Tax Office.
In the case of a top-level parent company of a group domiciled outside the EU that has comparable sales and operates in Germany via a medium-sized or large subsidiary, the income tax information report must be obtained and disclosed by this subsidiary or branch.
The same applies in the case of a non-group company with its registered office outside the EU and a domestic branch with sales revenues of more than EUR 12 million in at least two consecutive financial years, whereby this sales limit may not be fallen short of in two consecutive financial years thereafter.
Note: If a report in compliance with the law cannot be obtained, the subsidiary or branch must submit a corresponding declaration and to prepare and disclose an income tax information report itself using the available information. The obligations does not exist if the non-EU company publishes a legally compliant income tax information report on its website and the report is disclosed by at least one subsidiary/branch in the EU.
Content of the income tax information report
For the preparation of the income tax information report, detailed content specifications must be made regarding the companies to be included, the mandatory disclosures and the country-specific disclosure.
The mandatory disclosures to be made for the respective reporting period include:
- the type of business activity,
- the number of employees
- the revenues,
- the profit/loss before income taxes
- the income tax payable for the reporting period and the income tax paid in that period, and
- the amount of retained earnings.
The information above are to be disclosed separately for each EU member state, for each tax jurisdiction classified as non-cooperative under the EU list, and for the other tax jurisdictions in aggregate.
Note: Since the affected companies are essentially already subject to a corresponding country-specific reporting obligation vis-à-vis the tax authorities and the reporting requirements applicable in this respect may also be used as a basis for fulfilling the new public reporting obligation, the Federal Ministry of Justice, which drafted the intended legal requirements, estimates that the bureaucratic burden for the companies will be relatively low.
In exceptional cases, the companies concerned will not have to include certain information in the income tax information report if their disclosure would cause a significant disadvantage to the market position of the company to which it relates. However, the information not included have to be included in the income tax information report to be prepared for the fourth financial year after the reporting period at the latest.
The income tax information report is disclosed in the Business Register. For this purpose, the report must be submitted to the Business Register in German no later than one year after the end of the reporting period. In addition, the report is to be published on the company's website for at least five years with a corresponding period of notice. However, the obligation to publish the report on the company's website does not apply if disclosure is made via the Company Register and reference is made on the company's website to the fact that the report will be accessible via the Company Register's website for a period of at least five years.
In the future, the audit of the Supervisory Board also covers the income tax information report.
The auditor of the annual financial statements must also examine in future whether the company to be audited was obliged to disclose an income tax information report and whether it complied with its obligation. The auditor's report must provide information on the result of the audit.
The Federal Office of Justice is responsible for enforcing the obligation to disclose. It has the authority to impose administrative fines in the event of default and fines of up to 250,000 euros in the event of content-related violations.