The Council Directive (EU) 2016/881 amends Directive 2011/16/EU to enhance the automatic exchange of information in the field of taxation, responding to the growing issue of tax fraud and evasion. It highlights the need for transparency in dealings of multinational enterprise groups (MNE Groups) and establishes reporting obligations that require these groups to submit a country-by-country report, covering various key metrics such as revenue, profit, and tax paid for each jurisdiction in which they operate. This initiative aligns with global standards, particularly the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan.

Member States are required to ensure compliance by implementing appropriate penalties for non-adherence to the provisions set out in the Directive. The framework stipulates that the mandatory exchange of these reports should occur annually within specified timelines, thus aiding tax authorities in assessing risks associated with transfer pricing and ensuring fair competition in the internal market.