Edited by Davide Rotondo, Marta Goi and Angela Di Gennaro
The objectives of the framework
In line with the policy guidelines of the European Commission and the European Parliament, the need to respond to calls for greater transparency from multinational undertakings carrying out economic activities in the European Union has been highlighted. In this context, the disclosure of income tax information by certain undertakings and branches — also known as Public Country-by-Country Reporting (PCbCR) — was introduced at EU level and subsequently transposed into the domestic legal framework of each Member State.
The regulatory framework in Italy
Legislative Decree No. 128 of September 4th, 2024, published in the Official Gazette No. 214 of 12 September 2024, transposes EU Directive 2021/2101 of the European Parliament and of the Council by introducing new obligations for the disclosure and publication of specific income tax information by certain undertakings and branches. The provisions introduced by this regulatory framework apply to financial statements relating to financial years beginning on or after 22 June 2024. It should be noted that the applicable framework has to be read consistently with the Commission Implementing Regulation (EU) 2024/2952 of 29 November 2024, which establishes a common template and electronic reporting format for the PCbCR.
Scope of application: Entities subject to the new disclosure obligations
Based on the provisions of the regulatory framework, the entities required to prepare and publish the Public Country-by-Country Report are as follows:
| Undertakings and branches potentially in scope | Revenue threshold / Relevant criteria |
| Italian ultimate parent undertaking | Consolidated revenues on its balance sheet date exceeded for each of the last two consecutive financial years of €750 million, as reflected in its consolidated financial statements |
| Italian standalone undertaking | Revenue on its balance sheet date exceeded for each of the last two consecutive financial years of €750 million, as reflected in its annual financial statements |
| Subsidiary undertaking of a non-EU ultimate parent undertaking | Consolidated revenues of the ultimate parent undertaking on its balance sheet date for each of the last two consecutive financial years of €750 million, as reflected in its consolidated financial statements |
| Branch (or permanent establishment) of non-EU undertakings | Where the undertaking that opened it is: part of a group with consolidated revenues exceeding €750 million for each of the last two consecutive financial yearsa standalone undertaking with revenues exceeding €750 million for each of the last two consecutive financial years |
Exemptions and exclusions
The obligations to prepare and publish the PCbCR do not apply to entities subject to the specific provisions issued by Banca d’Italia pursuant to the Italian Banking Law (i.e. Testo Unico Bancario – Article 67(1)(e) of Legislative Decree No. 385 of 1 September 1993 — Consolidated Law on Banking and Credit) implementing the obligations under Article 89 of EU Directive 2013/36 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.
Furthermore, where an ultimate parent undertaking, its subsidiaries, any relevant branches, or a standalone undertaking and its branches are established or have a single fixed place of business or permanent business activity within the territory of a single Member State and no other tax jurisdiction, the obligations laid down by the regulatory framework shall not apply.
A subsidiary undertaking of a non-EU ultimate parent undertaking is not required to draft the PCbCR where the ultimate parent undertaking prepares a report on income tax information equivalent to that provided for under this framework, meeting simultaneously specific requirements in terms of accessibility, content and publication.
Similarly, the obligations shall not apply to branches where the standalone undertaking of a third country that opened the branch, or the ultimate parent undertaking in whose financial statements the undertaking that opened the branch is consolidated, respectively prepares a report on income tax information equivalent to that provided for under this framework, meeting simultaneously certain requirements in terms of accessibility, content and publication.
By way of example, but not limited thereto, an Italian subsidiary controlled by a non-EU ultimate parent undertaking is not subject to the described obligations where the non-EU ultimate parent undertaking prepares a report on income tax information equivalent to that provided for by Legislative Decree No. 128 of 4 September 2024 and, simultaneously:
- the report is made accessible to the public free of charge and in a machine-readable electronic format both on the website of the non-EU ultimate parent undertaking and on the website of the Italian subsidiary, within 12 months of the closing date of the relevant financial year;
- the report is drawn up in at least one of the official languages of the European Union, including English;
- the report states the name and registered office of the Italian subsidiary;
- the management of the Italian subsidiary complies with the publication and filing obligations with the Companies Register where the entity has its registered office or permanent representative office.
An Italian subsidiary undertaking controlled by an EU ultimate parent undertaking should not be affected by the PCbCR preparation obligations, as these are fulfilled by the EU ultimate parent undertaking itself.
Material scope: Content of the report on income tax information
Also in line with the aforementioned EU Implementing Regulation, the report shall include:
- General information regarding the ultimate parent undertaking / standalone undertaking preparing the report:
- The name of the undertaking subject to the obligation and the jurisdiction in which it has its registered office;
- The relevant financial year;
- The reporting currency;
- Confirmation of whether the information provided is based on the reporting instructions used for Country-by-Country Reporting under OECD Action 13 and Council Directive 2011/16/EU (DAC4).
2. Country-by-country breakdown with a list of jurisdictions, meaning Member States, European Economic Area countries, and non-cooperative jurisdictions as per Annexes I and II of the Council conclusions. For each jurisdiction, the following shall be reported:
- Country code;
- Total revenue, including revenue from related party transactions;
- Profit or loss before income tax;
- Income tax paid in the relevant financial year on a cash basis;
- Income tax accrued for the relevant financial year;
- Accumulated earnings;
- Number of employees.
For all other jurisdictions (i.e. those not falling within the above categories), the required information shall be reported on an aggregate basis.
3. List of subsidiaries and carried activities for each relevant jurisdiction:
- The name of each subsidiary consolidated in the ultimate parent undertaking’s financial statements and established in that specific jurisdiction;
- A brief description of the nature of the activities carried out in the jurisdiction.
4. Furthermore, explanations may be provided regarding significant discrepancies between the amounts of income tax accrued during the relevant financial year and the amounts of income tax paid on a cash basis, taking into account, where appropriate, the corresponding amounts relating to previous financial years.
In addition to the specifications set out in the aforementioned Implementing Regulation (EU), Legislative Decree No. 128 of 4 September 2024 confirms that the information subject to reporting and publication may be provided on the basis of the methods set out by the regulatory framework and the provisions issued by the Director of the Italian Revenue Agency (i.e. Agenzia delle Entrate) with regard to the OECD/DAC4 Country-by-Country Reporting.
Filing and publication procedures for the PCbCR
Within 12 months of the closing date of the financial year subject to reporting, the report shall be respectively:
- Filed with the Companies Register where the registered office or permanent establishment is located by the undertaking’s management;
- Published on the website of the undertaking required to prepare it, in Italian or in a language used in the international finance;
- Made and maintained accessible to the public free of charge for a period of at least 5 consecutive years.
Cross-functional responsibilities and penalties regime
The management of the undertaking is responsible for the preparation and publication of the report on income tax information in accordance with the regulatory framework described. In fulfilling this obligation, the management is required to act in accordance with the standards of professionalism and diligence.
Similarly, the supervisory body, in conducting the functions assigned to it by law, is required to monitor the compliance with the provisions and shall refer on this in the annual report to the shareholders’ meeting.
The statutory auditor is required to verify whether the obligation to prepare the PCbCR applies, starting from the financial year preceding the one on which the auditor is called upon to express its judgement, as well as the actual preparation and publication of the report by the management, by providing appropriate certification in the audit report.
With regard to the corresponding penalties regime, the following provisions apply to the management:
| Type of infringement | Penalty |
| Failure to file the report | Administrative pecuniary sanction pursuant to Article 1(145) of Law No. 208 of 28 December 2015 — from €10.000 to €50.000 |
| Late filing of the report — within 60 days of the deadline | Administrative pecuniary sanction reduced by half |
| Filing of the report more than 60 days after the deadline | Treated as failure to file |
| Filing of the report containing information not corresponding to the truth or omissions of material facts whose disclosure is required — unless the act constitutes a criminal offence | Doubled administrative pecuniary sanction |
Deadlines for the filing and publication of the first report: examples
As already set out in the preceding paragraphs, the provisions of Legislative Decree No. 128/2024 apply to financial statements relating to financial years beginning on or after 22 June 2024. Consequently, considering that publication and filing must take place within 12 months of the balance sheet date of the relevant financial year, the following first deadlines are provided by way of example:
| Type of financial year | First relevant financial year for PCbCR | PCbCR publication and filing deadline | Auditor’s certification |
| Intra-annual — 1 July – 30 June | 1 July 2024 – 30 June 2025 | 30 June 2026 | In the audit report on the 2025–2026 financial statements |
| Financial year equals to the calendar year | 1 January 2025 – 31 December 2025 | 31 December 2026 | In the audit report on the 2026 financial statements |
This newsletter is for informational purposes only and does not constitute professional advice.
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