Summary of the EU rules
The rules apply to multinational groups (MNEs) with total consolidated revenues exceeding EUR 750 million for each of the last two consecutive financial years1, if the group’s ultimate parent undertaking2 is either:
- based in the EU, or
- based in a third country and operates in the EU through a qualifying subsidiary or branch.
A qualifying EU presence is defined in accordance with Article 3 of the Directive 2013/34/EU (the EU Accounting Directive) and includes3:
- medium-sized or large subsidiaries that meet two of the following three conditions: a balance sheet greater than EUR 5 million, net turnover greater than EUR 10 million, or an average number of employees exceeding 50;
- branches which exceed the turnover threshold above (i.e., EUR 10 million) for each of the last two consecutive financial years.
Member States are nevertheless allowed to increase the limits above, up to EUR 7.5 million for the balance sheet total and EUR 15 million for the net turnover.
The disclosure obligation will also apply to EU entities that are not part of a group (i.e., standalone undertakings) that meet the size threshold. However, the rules do not apply to standalone undertakings or groups (including their branches) that are established or have their fixed place of business or permanent business activity in a single Member State.
Implementation into domestic legislation
All Member States that have published and adopted final legislation have adhered to the consolidated revenues group threshold prescribed by the Directive.
It should be noted, however, that the size threshold for the group is not assessed based on the euro amount in all Member States, generally because not all 27 EU jurisdictions use the euro as their local currency. Jurisdictions with such variation in the size threshold, i.e., due to foreign exchange differences, include:
- Bulgaria: BGN 1.5 billion (approximately EUR 766 million);
- the Czech Republic: CZK 19 billion (approximately EUR 773 million) for Czech headquartered MNEs and the CZK equivalent of EUR 750 million for non-EU headquartered MNEs;
- Demark: DKK 5.6 billion (approximately EUR 751 million);
- Hungary: HUF 275 billion (approximately EUR 724 million) for Hungarian headquartered MNEs and EUR 750 million for non-EU headquartered MNEs;
- Poland4: PLN 3.5 billion (approximately EUR 798 million); and
- Romania: RON 3.7 billion (approximately EUR 743 million).
Non-EU MNEs should also carefully consider the rules in each relevant Member State with respect to the size thresholds for qualifying subsidiaries and branches. In addition to potential differences arising from currency translations, variations may also occur due to the options available to Member States under the EU Accounting Directive, as mentioned above. As an example, France and Ireland chose to set the minimum threshold for branches at the higher end of the interval prescribed by the EU Accounting Directive in 2023, i.e., EUR 12 million. Notably, due to the early adoption of the rules in Romania, MNEs should also consider the lower monetary thresholds for subsidiaries and branches applicable in that jurisdiction before January 1, 2024, i.e., balance sheet greater than EUR 4 million, respectively net turnover greater than EUR 8 million.