Public country-by-country reporting: what German subsidiaries of international groups should clarify now

With the income tax information report (Ertragsteuerinformationsbericht), often referred to as the public country-by-country report, large groups disclose how much they earn in the individual states of the EU and EEA and how much income tax they pay there. The rules have been set out in Sections 342 et seq. of the German Commercial Code (HGB) since 2023 and apply for the first time to financial years that began after 21 June 2024, that is, to 2025 where the financial year is the calendar year. The report must be disclosed no later than one year after the end of the reporting period, so for 2025 by 31 December 2026. Where the financial year differs from the calendar year, the first deadline may already have passed: for a reporting period that began on 1 July 2024, it ended on 30 June 2026. This deadline now belongs in every compliance calendar.

The obligation applies to groups whose consolidated revenue exceeds €750 million in each of two consecutive financial years; the report covers the second of these years. Groups that prepare their financial statements in another currency convert the threshold at the exchange rate of 21 December 2021. If the ultimate parent company has its registered office in Germany, it reports itself. If it is based outside the EU and EEA, for example in the US, responsibility passes to the German subsidiary, provided that it is medium-sized or large under Section 267 HGB.

Its management must request the report from the parent company (Section 342d(1) HGB) and submit it in German to the Company Register (Section 342m HGB). If the parent does not provide the report, or its report does not meet the requirements, the subsidiary prepares its own report containing the information it has or can obtain, and states that the parent has not provided the necessary information. In addition, the report must be made accessible on the internet free of charge for at least five years; once it has been filed, a reference to the Company Register is sufficient for this purpose (Section 342n HGB).

Whether a German company is medium-sized or large depends on its balance sheet total, revenue and number of employees. This gives rise to situations that are rarely noticed at headquarters: an intermediate holding company with a balance sheet total in the hundreds of millions of euros, but with no revenue and no staff, can be small under the HGB and therefore fall outside the scope. The operating sister company, with a fraction of that balance sheet total, may on the other hand be required to report. However, a small subsidiary is also required to report if it serves solely to circumvent the reporting obligation (Section 342(1) no. 3 HGB). In addition, if the group has no subsidiary in the EU and EEA that is required to report, a German branch (Zweigniederlassung) with revenue of more than €12 million in two consecutive years may be required to report (Sections 342(2) and 342f HGB).

The German subsidiary’s obligations do not apply if the parent company publishes a report that meets the German requirements on its website, within the one-year deadline, free of charge and in an official language of the EU, and if, in addition, either another German subsidiary files it with the Company Register on time and in German, or a subsidiary in another EU or EEA state discloses it there. The report must state the name and registered office of that company (Section 342d(3) HGB). It is therefore worth agreeing with headquarters at an early stage which group company will take on this role.

The report describes the business activities and states, among other things, the number of employees in full-time equivalents, the revenues (Erträge), the profit or loss before income tax, the income tax accrued for the year and the income tax actually paid, and the accumulated earnings. This information must be shown separately for each EU and EEA state and for tax jurisdictions that, as at 1 March of the reporting year, are on the EU list of non-cooperative jurisdictions, or that were listed in its Annex II on that date and in the previous year; all other jurisdictions are aggregated. Information whose disclosure would be seriously prejudicial to the companies concerned may be omitted, with reasons given, except for the listed jurisdictions; it must be disclosed no later than in the report for the fourth subsequent financial year (Section 342k HGB). The report is prepared using an EU template in a machine-readable electronic format (Section 342l HGB, Implementing Regulation (EU) 2024/2952); where the parent company is outside the EU and EEA, the format should be agreed at an early stage.

Groups of this size prepare a country-by-country report for the tax authorities in any case. The law allows the information as a whole to be determined in accordance with the rules for that report; the report must then state which approach has been chosen (Section 342h(4) and (5) HGB). Even so, the two reports are not identical: the income tax information report is public and is structured differently. Groups that reuse the data should carry out a thorough one-off reconciliation of the differences and record the approach for subsequent years.

Where the financial year is the calendar year, the statutory auditor assesses for the first time, in the audit of the 2026 annual financial statements, whether the company was subject to the disclosure obligation for 2025 and has fulfilled it; the auditor does not audit the content of the report. The result is set out in a separate section of the auditor’s report (Bestätigungsvermerk). A missed report thus becomes visible to shareholders, banks and business partners. Sanctions also apply: if the report is not disclosed, the Federal Office of Justice imposes administrative fines of up to €250,000 on the managing directors as well as on the company; a regulatory fine (Geldbuße) of up to €250,000 may be imposed for incorrect or incomplete reports (Sections 342o and 342p HGB).

For German managing directors, the report is above all a matter of organisation. Those who clarify now who reports and where the data comes from will complete the first disclosure without a last-minute rush and will have an established process for subsequent years.