EY Tax News, December 2021

The December issue of the tax news summarizes the Directive on Public Reporting by Countries for Multinationals Operating in the EU, adopted by the European Parliament and the content of the new Convention between the Republic of Slovenia and the Kingdom of Sweden on the Elimination of Double Taxation.

This time, we also include a short section on the renewal of the REK forms (payroll), as several existing REK forms are to be abolished and a single REK-O form is to be introduced.  

The EU Parliament adopts public Country-by-Country reporting for multinationals doing business in the EU

On 11 November 2021, the EU Parliament adopted the Directive amending Directive 2013/34/EU, and introducing public Country-by-Country Reporting (CbCR) in the EU.

The implementation of public CbCR will impact multinational enterprises with consolidated group revenues of EUR 750 million or more, active in the European Union. Importantly, the public CbCR will be mandatory for multinational groups, whether headquartered in the EU or outside. For any multinational with headquarters outside of the EU, the obligation will fall on its subsidiaries or branches in the EU, unless the non-EU multinational makes the CbCR group report (i.e. as implemented by BEPS Action 13) publicly accessible and indicates which subsidiary or branch in the EU is responsible for the publication of the CbCR on behalf of the "parent" company.

The format of the report will be prescribed and required information will generally follow those that the multinationals are already reporting for transfer pricing purposes (i.e. OECD CbCR reporting):

• Total net revenue, incl. from transactions with related parties
• Profit / loss before tax
• Corporate income tax accrued and paid
• Accumulated earnings
• Number of employees
• Short description of business activities

The above details will need to be disclosed for every EU Member State where the group is performing business activities, as well for each jurisdiction deemed non-cooperative by the EU (i.e. the so called black / grey list).

The CbCR report will need to be published in Member State´s business register as well as companies´ website and for a period of five years.

The Directive will come into force on 21 december 2021. EU Member States will then have 18 months to transpose the Directive into national law. This means, that companies will need to comply with the provisions of the Directive by mid-2024.

The Directive increases business transparency of multinationals and with this also exposure to public scrutiny and regulatory monitoring. We recommend that companies start preparing for the upcoming changes in time.

New Convention between the Republic of Slovenia and the Kingdom of Sweden on the Elimination of Double Taxation

On 22 September 2021, the National Assembly adopted the Act on the Ratification of the Convention between the Republic of Slovenia and the Kingdom of Sweden on the Elimination of Double Taxation with Respect to Property Taxes and the Prevention of Tax Evasion and Avoidance, with the Protocol (the Convention). The Convention shall enter into force on the thirtieth day after receipt of the last notification received through diplomatic channels, scheduled for the beginning of next year.

The main amendments to the Convention are, in particular, more precise definitions of articles and concepts, and the wording of the articles is following modern tax practice. Thus, the provision on an independent representative is added to the definition of a permanent establishment, the paragraphs determining the taxation of the permanent establishment's profit are changed, the income of Slovenian residents in Sweden will be deducted instead of exempted and both countries will be entitled to interest taxation.

Financial Administration is renewing and simplifying REK forms

The Financial Administration (FA) has started with the planned simplification of existing REK forms. The main change will be the elimination of several existing REK forms (REK-1, REK-1a, REK-2, PNiPD) and the introduction of a single REK-O form. Forms REK-1f and REK-1b will not be included in the simplification for the time being.

The aim of the amendment is to simplify reporting for taxpayers. REK forms currently contain more than 300 different entry fields, in the renewed REK-O there are expected to be only 37 fields. The FA has determined such a set of data for the revised form that it will enable the greatest possible automation of the calculations of payment obligations and the total amounts of receivables for tax accounting purposes. The list of types of income will also be simplified, currently listing more than 100 different types, while the planned merger of substantially equivalent incomes will cut the list down to only 73 different types of income. The data set in the REK-O form will also include additional information on salary, which will enable the gradual elimination of monthly reporting to AJPES via the ZAP-M form.

Submitting the form in the case of voluntary self-disclosure will also be simplified. If the taxpayer indicates that the form is submitted based on voluntary self-disclosure, the REK-O form will be automatically supplemented with the self-disclosure form. It will no longer be necessary to submit data separately.

The introduction of the revised forms is expected in April 2022.