Family business owners: the impact of EU wide reporting obligations
You will have noticed that the volume of financial data required to be shared nowadays is increasing. Banks, government authorities and even commercial business parties are requesting more and more information about you and your business. Have you wondered what happens to all this information? This is what you need to know.
Countries have acknowledged that they share an interest in protecting their tax systems by eradicating tax evasion. Therefore, countries all over the world increasingly cooperate in the fight against tax evasion. Creating transparency by gathering and exchanging financial information is considered to be critical. The EU is at the vanguard of these transparency measures. It embraces the developments in this field and has already implemented many measures including (but not limited to) the Common Reporting Standard and the OECD’s Country-by-Country Reporting as well as Master file and Local file requirement. In addition, within the EU, tax rulings are also automatically being exchanged between tax administrations.
How does this impact you and your business?
The increase of various reporting obligations may have a serious impact on your administrative apparatus. Being compliant is becoming more burdensome and comes at a price. Furthermore, you should be aware of the fact that more financial data about you and your business is known and accessible. Although the information is not publicly available, it is being exchanged at higher frequencies between certain stakeholders, without your knowledge.
Same information, different formats
This heightened ‘visibility’ may provide tax administrations with insights, which lead to questioning. Moreover, EU member states will adhere to different interpretations and implementations of EU reporting obligations. In the absence of seamless interaction between EU member states, practical outcomes will diverge. Consequently, providing the same information multiple times in different formats will become a reality. We emphasise that being aware and actively in control of your ‘public’ profile is of great importance.
- Assume that a financial and legal ‘snapshot’ of your business is known and accessible
- Be in control of the ‘snapshot’ by ensuring alignment within your business
- Stay informed about transparency and EU wide reporting developments
- Safeguard compliance: act on these developments if needed