Public CbCR: Romania leads the way but Sweden is not far behind

In 2021, the EU Directive on Public Country-by-Country Reporting (“CbcR”) obligation came into force, by making it mandatory for certain companies to publicly disclose tax and other economic data. With public CbCR, multinational enterprises face increased pressure in terms of tax transparency. The rules apply to groups established within the EU with consolidated turnover in excess of EUR 750 million. Qualified multinational companies with non-EU based headquarters operating in Romania  are required to publicly disclose how much tax they pay in each EU country where they are established. Read about the CbCR requirements for non-EU headquartered groups with an establishment in Romania below.

New CbCR requirements for non-EU headquartered Groups established in Romania
The Romanian Government was the first government to formally introduce the EU public country-by-country (CbC) reporting obligations into its national legislation, with a deadline for the CbC preparation and public disclosure significantly earlier than that set by the EU Directive. The Romanian Ministry of Finance has clarified that qualifying Romanian-based multinational enterprises and multinational enterprises with subsidiaries or branches in Romania, solely if they belong to a non-EU headquartered group, are required to file and publish certain information on a country-by-country basis. The threshold of the annual consolidated revenue is of RON 3.7 billion (equivalent of EUR 743 million) in each of the last two consecutive financial years. 

Clarifications in the national legislation entails that a Romanian entity with an ultimate parent entity headquartered outside of the EU is only exempted from publishing CbCR in Romania if the obligation was fulfilled in another EU country. Since Romania is the first country to implement the Public CbCR Directive (already for financial year 2023) into local legislation and considering the first filing obligation by the end of 2024, a Romanian entity with an ultimate parent entity headquartered outside of the EU is required to publish the CbCR in Romania.

Effective as of financial years beginning on or after January 1, 2023

The new legislation is effective starting January 1, 2023 and applies to financial years beginning on or after January 1, 2023. Groups are required to publish and provide access to a report on the group’s income tax information. The report must be published for the more recent of those two consecutive financial years, which means that if the group has a consolidated annual turnover exceeding 3.7 billion RON both for the financial years 2023 and 2024, then the disclosure must be made during 2024.

Further guidance

The Romanian government published further guidance regarding the public CbC requirements in “the Official Gazette” on June 21, 2023. See below. 

• The publication obligation
  In cases where the ultimate parent of a Group is from a non-EU country, the obligation to publish the report may be fulfilled by any other affiliated entity within the group falling within the scope of these rules. However, until the EU directive has been implemented and come into effect in more countries it means that in 2024  the report must be published by a company/branch in Romania.
  
  
• Reporting deadlines
  For an ultimate parent company whose financial year coincides with the calendar year, the first reporting year shall correspond to the financial year 2023, with the report on income tax information being published no later than 31 December 2024.
  For an ultimate parent company whose financial year differs from the calendar year, for example a financial year of 1 April 2023 to 31 March 2024, the first reporting year shall correspond to 31 March 2024, with the report on income tax information being published no later than 31 March 2025.
  
  
• Safeguard clause
  Romania has implemented the safeguard clause which allows multinational enterprises to postpone disclosing commercially sensitive information for a maximum of five years, subject to specific circumstances. The guidance indicates that if an entity chooses to defer the disclosure of commercially sensitive information, the report that resumes the disclosure should contain information corresponding to the current and previous financial years for which the information was not published.
  
  
• Financial reporting frameworks
  There are also additional guidelines regarding how certain financial data should be reported, e.g. regarding how to calculate net sales if it is not defined in the financial reporting framework applied when preparing the annual accounts.

Link to the romanian legislation

Recommended action points

Qualifying multinational enterprises operating in Romania that belong to non-EU headquartered groups should be preparing the required CbC disclosure and consider how their CbC data may be interpreted. 

Romania was early in adopting the Public CbCR-directive, and several other countries within the EU are closing in. For Sweden, similar rules apply for financial years commencing after May 31, 2024. Although there is a common EU framework, each country has made its own implementation, sometimes with certain minor differences.

Complying with the additional public CbC requirements should be considered in the broader context of a group’s overall tax strategy and tax governance. Given the increased public disclosure regarding a group’s tax position and potential impact on interested stakeholders, including investors and customers, companies should consider reviewing their tax transparency strategy. At PwC, we can support organizations in the preparation and implementation of the new public CbCR requirements as well as their wider tax transparency strategy to ensure that the story presented about the business is both consistent and clear.

You can also read: Public country-by-country reporting: Tax transparency and CSR