Per this article in Bloomberg Tax, the EU actions, such as the Corporate Sustainability Reporting Directive (CSRD), may soon expose US and other non-EU multinational corporations to a novel type of tax reporting.
In short, since the 28 November 2022 CSRD, many believe reporting will start with the 2024 fiscal tax year.
Here is the crucial passage, with bold on the key words:
“The topic of tax compliance as an element of MS stands out, in that it is [not] considered … by CSRD. Nevertheless, the identification of procedures that are relevant and adequate for establishing compliance with the MS can follow the analytical process proposed for human rights and corruption, by considering OECD MNE Guidelines, which holds two key [tax] expectations for undertakings:
“(a) Undertakings should comply with the letter and the spirit of tax laws and regulations of the countries in which they operate. Complying with the spirit of the law is defined as “discerning and following the intention of the legislature”, which in turn is supposed to guide the determination of the tax amount legally required. (OECD MNE Guidelines, XI.1.)
“The first expectation is focused on the end-goal or performance of undertaking, for example avoiding and addressing negative impacts on society. The second [on governance] focuses on the means to achieve that end, for example policies and processes to embed tax compliance throughout an undertaking.”
The ‘spirit of the law’ is the issue.
What does this mean for you? If you are a non-EU organization operating in the EU, you are out of time. You need to have a sustainability program in place in the coming months and begin work on your ESG program. This is going to be far more painful for organizations that are not sustainable and do not have an ESG program in place or well into development.