What you can expect from this article

We’re all familiar with them: multinational corporations. They sell products in Germany, run a company in France, employ staff in Spain, have a branch in Ireland, and operate further companies here and there outside the EU. At the end of the year, we look at their annual report and find out: what was the turnover? How much profit was made? Sometimes we even find out how much income tax was paid in total. But what I’d really like to know is missing: where was the money earned – and where were the taxes on it paid? Welcome to the topic of Public Country-by-Country Reporting, or pCbCR for short.

Why pCbCR might also be a good idea for a corporate group

Public country-by-country reporting sounds complicated. However, if you put the term aside for a moment, the idea behind it is surprisingly simple. It boils down to this: why should this actually be kept secret? And by „this“, we mean the tax and cash flows of multinational corporations. After all, taxes fund a large part of what we take for granted in our daily lives: infrastructure, schools, public administration, security and many other public services. Companies also make use of this infrastructure. Furthermore, corporations employ many people, generate profits and contribute to the financing of the community through their taxes.

In the case of a company operating exclusively in Germany, this relationship is still relatively easy to understand. However, things become more complicated when it comes to a multinational group. After all, a group can generate billions in turnover and operate in dozens of countries. Until now, however, it has only been possible to gain a limited insight from the outside into the geographical distribution of business activities, profits and tax payments. Yet there is certainly a public interest in these processes, and this interest takes many forms. To address this, the EU has introduced a new public reporting standard: Public Country-by-Country Reporting.

The pCbCR publishes information that is of interest to the public

When large international companies carry out business activities in many countries, the public should be better able to understand where these activities take place and where income tax is payable. That’s actually quite reasonable, but what exactly is made public? To find out, let’s take a look at how this has been implemented in Germany. This is what the German legislature calls it: Income Tax Information Report. That was to be expected. Among other things, it sets out information on business activities, the number of employees, revenue, pre-tax profits or losses, as well as income tax due and actually paid. Retained profits are also included in the required disclosures.

This paints a much more nuanced picture than that presented in previous annual reports. Let us take a purely hypothetical example: a group generates high revenues in a particular country, employs many people there and makes a substantial profit. At the same time, the income tax liability there is comparatively low. But is that automatically wrong? No. Because there may be tax loss carry-forwards, or tax incentives may apply. Or there may be differences between the profit reported under commercial law and the tax base. It may also be that withholding taxes or other factors play a role. Accordingly, the pCbCR is not intended to be an automatic tax shaming exercise. However, the report does highlight these interrelationships.

It is not just the state that is watching, but the general public as a whole

The principle of country-by-country reporting is not, in itself, an entirely new idea. Large multinational groups are already familiar with country-specific reports from their tax reporting obligations. However, the word „public“ makes a crucial difference: the information is no longer intended solely for tax authorities, but becomes publicly available. In Germany, the income tax information report is made available via the company register. Furthermore, it must, in principle, also be available on the company’s website, although under certain conditions, the website may simply refer users to the free access option in the company register.

In future, it will not only be tax authorities that take an interest in this. Investors, journalists, business partners, employees, NGOs, competitors – or simply interested members of the public – will also be able to form their own view and draw their own conclusions. These conclusions could go in any direction, from halting investments and granting loans to making purchasing decisions. And it represents a completely new dimension of tax transparency.

pCbCR does not apply to every company

The EU Public Country-by-Country Reporting scheme applies to very large companies and groups. A key threshold is a turnover or consolidated turnover of 750 million euros, with the statutory requirements assessed over two consecutive financial years. For companies with a financial year that coincides with the calendar year, 2025 is the first reporting period. The corresponding report must be disclosed no later than one year after the end of the reporting period – in other words, in principle by the end of 2026. And from a technical perspective, too, the matter is not simply a case of producing a neatly designed PDF: in accordance with European requirements, the report must be drawn up using a prescribed form and in a machine-readable electronic format. It is at this stage, at the very latest, that what is essentially a simple idea once again becomes a substantial reporting challenge.

The most exciting thing about the pCbCR will therefore probably not be the publication itself, but the interpretation of the figures. After all, when information is made public, it is compared.

• Why is the tax-to-income ratio significantly higher in Country A than in Country B?
• Why do many employees work in one country, whilst a large proportion of the profit is reported in another?
• Why does the amount of tax payable change from one year to the next?

Transparency without context is ultimately worthless

There may be perfectly reasonable answers to the questions that arise. However, companies should be aware of these answers. Public country-by-country reporting therefore involves not only transparency and disclosure, but also a critical examination of the image that a company’s own data conveys to the outside world. After all, transparency works both ways: it can raise questions. But it can also demonstrate the positive contribution a company actually makes in the various countries. Accordingly, pCbCR is more than just another regulatory requirement. Of course, it means new data, a new format, a new deadline and a new disclosure requirement. Yet from a different, forward-looking perspective, the picture looks quite different.

For example, large corporations benefit across national borders from good infrastructure, thriving markets and a well-educated workforce in various countries. Put simply, the pCbCR helps them to generate countless added benefits for banks, investors and other stakeholders, as well as customers and partners, all at once. Greater trust, stronger ties, higher investment, lower interest rates – all of this can be achieved in a relatively straightforward manner. And perhaps that is the best way to understand pCbCR: not as the most complicated new abbreviation from the world of tax law, but as an attempt to provide a publicly accessible answer to a fairly simple question.

Leverage pCbCR’s strengths with multilingual cloud software

Where does a group’s economic activity take place, where are its profits generated, and where are taxes paid on them? These simple questions give rise to a complex process that requires meticulous working practices and cross-border teamwork throughout. Data must be collated, allocated to the correct tax jurisdictions, verified and finally converted into the prescribed electronic reporting format. The new pCbCR module in the Opti.Tax Cloud is now available to support this process. The powerful, 100 % cloud-based pCbCR software supports all relevant EU languages and is designed for international, seamless teamwork.

With this software solution, all country-by-country reports are produced in a structured and systematic manner, based on a shared database. As a result, despite the vast amount of data, the numerous subsidiaries and the many regulatory requirements, multinational companies ultimately achieve what really matters: a clear overview of their own economic activities and the significant tax contribution they make.

Try Opti.Tax Cloud pCbCR for free now: Find out more now.