Public CbC-R – a report that requires decisions, not just data

The financial year beginning after 21 June 2024 (which, for most groups, means FY2025) will be the first reporting period for which the largest corporate groups, including those headquartered within the EEA, will be required to prepare and publish a Report on Income Tax (Public CbC-R).

Although some groups had previously disclosed such information on a voluntary basis, from this point onwards the publication of the Public CbC-R has become mandatory.

The new regulations are intended to increase the tax transparency of the largest multinational groups by requiring the public disclosure of information on their activities, revenues and income taxes in individual jurisdictions.

In practice, however, Public CbC-R is far more than another reporting obligation. It is a group-wide project requiring well-considered decisions regarding the reporting model, the scope of information to be disclosed, and the management of associated risks.

Who is subject to the Public CbC-R obligation?

The obligation to prepare a Public CbC-R applies to:

• the ultimate parent undertaking of a corporate group; or
• a stand-alone undertaking,

established within the EEA, whose revenues, as reported in their annual consolidated or separate financial statements, exceed PLN 3.5 billion in each of the two most recent financial years.

Special attention: parent company established outside the EEA

Particular attention should be given to groups whose ultimate parent undertaking is established outside the EEA.

In such cases, the ultimate parent undertaking is not directly required under the legislation to prepare a Public CbC-R. This does not, however, mean that the reporting obligation cannot apply to its subsidiaries.

In practice, two approaches are possible:

1. The ultimate parent undertaking prepares and publishes the report on its website and designates an EEA-based subsidiary responsible for filing the report with the relevant register.
2. Each subsidiary falling within the scope of the regulations fulfils the reporting obligation independently.

It is advisable to analyse the available options at an early stage and determine the reporting model at the group level. The chosen approach should take into account not only organisational considerations but also the potential business and reputational implications associated with the public disclosure of information.

The earlier the group makes this decision, the easier it will be to plan the reporting process appropriately and minimise the related costs and administrative burden.

Publication deadlines – local differences matter

Although the Public CbC-R requirements originate from EU legislation, the manner in which they have been implemented may differ between individual jurisdictions.

In Poland, the report must be published within 12 months of the end of the financial year to which it relates. It should, however, be borne in mind that other countries may provide for different publication deadlines. For example, Spain has introduced an earlier publication deadline of six months after the end of the tax year, while in Hungary the deadline ranges from four to six months, depending on the circumstances.

For multinational groups, this means that the applicable rules in each jurisdiction in which they operate should be verified well in advance.

Safeguard clause

An important feature of the Public CbC-R framework is the possibility of applying the safeguard clause, which allows the temporary omission of certain information from the report. It should, however, be noted that this mechanism has not been implemented in all jurisdictions.

In Poland, where the disclosure of specific information contained in a Public CbC-R could seriously prejudice the market position of the reporting undertaking, that information may be temporarily omitted from the report.

The application of the safeguard clause must, however, be duly justified. The report should specify which information has been omitted and include an explanation of the reasons for doing so. The omitted information must subsequently be disclosed in future reports, no later than five years after the date on which it was initially omitted.

The safeguard clause does not apply to information relating to entities established in non-cooperative tax jurisdictions.

In Poland, applying the safeguard clause does not require any prior approval or a separate administrative procedure. Nevertheless, the decision to omit information should be preceded by a thorough assessment, and the justification for doing so should be prepared with due care.

Sanctions

Failure to prepare a Report on Income Tax, preparing the report in breach of the applicable regulations, or including inaccurate or misleading information may result in liability for the individuals responsible for fulfilling this obligation, in particular members of the Management Board.

Such infringements are punishable by a fine, imprisonment for up to two years, or both penalties imposed concurrently.

Given the scope of the information disclosed and the public nature of the report, the proper preparation and verification of the data should be regarded as a key element of the reporting process, requiring appropriate coordination across the entire Group.

Strategy first, report second

Corporate groups should already begin preparations that go beyond simply determining whether the reporting obligation applies. Establishing a consistent group-wide approach is essential, covering not only the regulatory requirements but also the potential business and reputational risks associated with the public disclosure of information.

In practice, it is advisable to:

• determine whether the ultimate parent undertaking is established within the EEA;
• analyse the local requirements applicable to individual entities with regard to the reporting deadline, the scope of the report and the manner of its publication;
• determine the reporting model – either a centralised group-level approach or a local approach in individual jurisdictions;
• assess which information included in the report may be commercially or reputationally sensitive;
• prepare an appropriate justification for the potential application of the safeguard clause;
• verify the consistency of the information presented in the report with other information disclosed by the group and its constituent entities, including, among others, annual reports and GloBE reporting;
• ensure appropriate coordination of the collection of data from individual jurisdictions.

Summary

Public CbC-R should not be viewed solely as another reporting obligation. The report will become a publicly available source of information enabling stakeholders to assess how the largest corporate groups conduct their business, generate revenues, achieve financial results and pay corporate income tax across individual jurisdictions.

As a result, preparing the report requires combining a compliance perspective with an assessment of the potential business, reputational and organisational risks. In practice, one of the greatest challenges may prove to be the correct identification and fulfilment of the reporting obligation for groups whose ultimate parent undertaking is established outside the EEA, as well as ensuring the appropriate management of information before it is publicly disclosed.

If you require support in determining whether the reporting obligation applies, establishing the responsibilities of individual entities within your group, or preparing your Public CbC-R report, please do not hesitate to contact us.