In the A&M Spotlight, the A&M Tax team regularly highlights current developments and trends in CbCR. The focus is on interpreting regulatory guidance and deriving relevant insights for business stakeholders, with the aim of providing food for thought.

EU Public CbCR Is Not an Appendix to the Annual Report

Why the table multinational enterprises (MNEs) are about to publish will be read as a verdict on their tax behaviour and checked against every other figure they disclose.

EU Public Country-by-Country Reporting looks harmless: six data points per jurisdiction, a template, and a filing deadline, with data that can be derived from OECD non-public CbCR. It is not an appendix to the annual report; it is a tax narrative, published in table form, with no mandatory accompanying notes to explain it. [1]

The template's origins explain the mismatch. CbCR was designed in 2015 under OECD BEPS Action 13 as a confidential risk-assessment tool: one filing submitted to the parent's tax administration and exchanged between tax authorities under conditions of confidentiality, consistency, and appropriate use. The OECD makes clear that the information alone is not conclusive evidence that transfer prices are or are not appropriate and should not be used to propose adjustments based on global formulary apportionment.[2] Directive (EU) 2021/2101 adapted the framework for public disclosure, without the confidentiality that applies to OECD CbCR.

To put it bluntly: the annual report is read by analysts. The Public CbCR table is read by everyone else.

1. The words are not the MNE’s words

Revenue, profit or loss before income tax, income tax paid on a cash basis, income tax accrued for the current year, accumulated earnings, and the number of  full-time equivalent employees all have precise CbCR meanings. They are not necessarily the meanings used in an MNE’s consolidated accounts or assumed by its readers. The result is a table that looks like the financial statements and uses the same vocabulary but may not reconcile directly to them. [3]

Every figure a multinational publishes will be compared with the annual accounts and with its other public reporting, including sustainability statements, tax transparency reports, and national filings. Someone will build that bridge. If the MNE has not built it first, the difference becomes the story.

2. The effective tax rate (ETR) trap

The first thing many readers do with a CbCR table is divide either income tax paid or income tax for the current year by profit before tax and compare the result with the statutory rate. That calculation can be misleading. 

Four structural reasons, none of them about avoidance. CbCR captures no deferred tax, so timing differences hit the ratio in full. Non-deductible expenses and exempt income are invisible, so the base is not the taxable base. Some jurisdictions apply progressive rates, so there is no single benchmark. And tax is aggregated per jurisdiction: loss-making entities sitting alongside fully taxed ones distort the blended rate beyond recognition. In a confidential filing, a tax authority can assess these limitations alongside other information available to it; a public reader may not have that context.[4]

An effective tax rate derived from CbCR should not be compared directly with the statutory rate without considering the underlying differences. Multinationals should explain the gap before someone else calls it avoidance.

The effective tax rate is only one example, chosen here because it is the calculation every reader reaches for first, but it is far from the only figure in a CbCR table that can be misread this way.

3. Choosing the reader

Investors, media, NGOs, employees, and tax authorities read the same table with entirely different questions in mind. Investors see a risk signal. Media look for a headline. NGOs benchmark for avoidance. Employees judge fairness. Tax authorities may compare the table with non-public data they already hold.

No single explanation satisfies all five. A multinational can, however, decide which readings it is prepared to defend and build the evidence: scoping and readiness, governance, data reliability and consistency, a risk assessment of the numbers before they go out, and a disclosure strategy that says something rather than nothing, with internal controls and audit documentation where assurance is expected. 

Publication is a compliance event. Interpretation is a reputational one. The two are managed by different people, on different timelines, and only one of them has a deadline in the directive.

The key question is therefore no longer:

"Is the multinational ready to publish its Public CbCR?"

But rather:

"Is it ready to explain the table?"

DOWNLOAD THE ARTICLE

1. European Union, "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," December 1, 2021.
2. OECD, Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 - 2015 Final Report (OECD Publishing, 2015), paragraphs 25 and 59.
3. Directive (EU) 2021/2101, Article 48c; OECD, Action 13 - 2015 Final Report, paragraphs 25 and 59.
4. OECD, Action 13 - 2015 Final Report, paragraphs 25 and 59.

How A&M Can Help:

Public Country-by-Country Reporting is no longer just a disclosure exercise. It introduces new governance, compliance, assurance, and reputational challenges that require organizations to be prepared not only to publish their data, but also to explain it clearly and confidently. A&M helps multinational groups build a robust framework for Public CbCR readiness, compliance, and stakeholder communication.

A&M supports clients with:

• Public CbCR readiness assessments to evaluate applicability, scope, and the quality, reliability, and consistency of data, processes, and controls before publication.
• Governance and audit readiness, including assessment of supervisory board review obligations (§ 171 (1) sentence 4 AktG), clear ownership across functions, and briefing materials for governance bodies.
• Data reconciliation and consistency reviews across EU Public CbCR, Australian Public CbCR, OECD non-public CbCR, consolidated financial statements, Pillar Two disclosures, tax transparency reports, sustainability reporting, and other filings.
• Internal control framework and Tax CMS enhancement, including process design, documentation, and controls to support sustainable compliance.
• Risk assessments of disclosed information to identify potential compliance, governance, reputational, and stakeholder communication risks before publication.
• Disclosure and stakeholder communication strategy to help organizations explain results and address questions from investors, media, NGOs, employees, and tax authorities.
• Accompanying review of Public CbCR reporting, covering content accuracy, completeness, consistency, and process effectiveness, including audit-ready documentation that can be maintained and updated in future reporting cycles.
• Voluntary independent assurance support for EU Public CbCR, including readiness for ISAE 3000 assurance engagements and related process documentation.
• Global tax advisory support without audit conflicts, leveraging A&M's international tax professionals to provide practical guidance on evolving transparency and reporting requirements.