Public CbC Report in 2024 – the main implications
Context of Public CbC
The Public Country by Country (Public CbC) report is a legislative initiative at European Union level aimed to bring more transparency to the tax practices of groups of entities that have a presence in the European Union.
Romania hastened to transpose the provisions of the EU Directive regulating Public CbC reporting earlier than the minimum term stipulated by the Directive. EU member states had the option to transpose the Directive by June 22, 2023, but Romania opted for an early transposition, with Order 2048/2022 entering into force on January 1, 2023. For a significant number of entities in Romania, this approach can generate the obligation to report local CbC information that actually concerns the entire group they belong to.
Although the local CbCR legislation has been supplemented and clarified, taxpayers still face difficulties in understanding the legal obligations, but also the lack of an official form to facilitate the preparation of the report.
In this context, the completion of the report remains a complex issue and an obligation whose non-fulfillment involves a series of consequences. In the following part, we detail the three main negative consequences associated with failure to properly fulfill this obligation: damage to reputation, the opinion of the statutory auditor and difficulties in attracting financing.
Damage to reputation
Disclosure of centralized information about operational activity, financial data and detailed tax information on tax jurisdictions where a group of companies is present can be a sensitive subject. The lack of clarity as well as the possible correlations between these pieces of information can generate a negative reaction from the public, the mass media and why not NGOs, the reputation of the groups can be significantly affected. Partners and customers may also react negatively, with risks to the company’s image. Companies perceived as non-transparent or with questionable tax practices lose customers, business partners and access to financing.
Statutory auditor’s opinion
The statutory auditor’s opinion must certify whether an entity had the obligation to publish a report on Public CbC and whether it was published in accordance with the legal provisions in force. Under these conditions, understanding the legal obligations regarding this reporting, as well as complying with them, is essential to avoid a negative opinion from the auditor. Such an opinion may attract the attention of interested parties (e.g. tax authorities, business partners, potential investors and financiers) and may generate additional negative consequences.
Difficulties in attracting financing
Some investors, financiers or banking institutions may become reluctant to finance companies with low tax transparency, even if they comply with the law. Thus, not publishing the Public CbC report can generate difficulties in attracting funding. Obtaining development financing will become more difficult and expensive, negatively affecting the growth of companies in increasingly competitive markets.
The CbC Public Report can have significant implications for taxpayers in Romania. They must be aware of the possible consequences of this reporting, such as those presented above.
Nowium stands by its partners with complex consulting services for any type of financial or non-financial reporting. Since 20 years we have had answers to our customers’ difficult problems or we solve them before they become problems.
Article written by Raluca Mihăilă, Transfer Pricing & Tax Partner, Nowium Transfer Pricing
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