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DAC4

Directive on Administrative Cooperation (automatic exchange of country-by-country reports) 

DAC4

Council Directive (EU) 2016/881 of 25 May 2016 (DAC4) provides for automatic exchange of information (AEOI) in the field of taxation in relation to country-by-country reports. It is the third amendment to Directive 2011/16/EU in Administrative Cooperation in Direct Taxation. 

The main goal of DAC4, alongside information supplied by multinational enterprise groups (MNEs) for local/master files, is to provide EU tax authorities with information on the structure, transfer-pricing policies and internal transactions of MNE groups. 

This information is used by tax authorities to check for risks of tax abuse due to aggressive tax planning and other base-erosion and profit-shifting risks related to the MNE group.

About country-by-country (CbC) reports

The EU Tax Observatory has developed a country-by-country report statistics tool that examines key financial data of the largest multinational groups, including MNE groups resident in the EU, using anonymised and aggregated country-by-country report statistics. This data represents an important new source of information on the global tax and economic activities of multinational enterprises, including how much MNE groups earn and pay in taxes in countries where they operate.  

For the year to 30 June 2023, 25 708 CbC reports were exchanged between EU countries. For the year to 30 June 2022, 1 767 reports were exchanged. 

Scope

DAC4 applies to MNE groups with total consolidated revenue equal to or higher than EUR 750 million and a presence in the European Union. The country-by-country report includes the following information for every tax jurisdiction in which the MNE group does business: 

  • the amount of revenue
  • the profit before income tax
  • the income tax paid and accrued
  • the number of employees
  • the stated capital
  • the retained earnings and the tangible assets 

Reporting

MNE groups are obliged to file a country-by-country report to the EU country of its tax residence with respect to its reporting fiscal year no later than 12 months after the last day of the reporting fiscal year of the MNE group. 

The tax authority of the EU country that received the report shall, by automatic exchange, communicate the report to the tax authority of any other EU country in which one or more constituent entities (i.e. companies of the MNE Group are either resident for tax purposes, or are subject to tax with respect to the business carried out through a permanent establishment). This should be done within 3 months of the submission of the report. 

International cooperation

To ensure tax transparency at the international level, Action 13 of the OECD/G20 Base Erosion and Profit Shifting Project provides for country-by-country reporting and local/master files for transfer pricing purposes. This means that there will be bilateral exchanges of country-by-country reports between EU and non-EU jurisdictions with respect to their resident MNE constituent entities.

Legal texts

Council Directive (EU) 2016/881 of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation 

Directive (EU) 2021/2101 of the European Parliament and of the Council of 24 November 2021 amending Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches 

Commission Implementing Regulation (EU) 2018/99 of 22 January 2018