The disclosure requirements use terms which need to be defined to ensure consistency of disclosures provided by institutions and audited by their auditors. In this context we seek clarification concerning tax as referred to in Article 89(1)(d) and (e) of Directive 2013/36/EU (CRD). Does it contain only current tax expense or also deferred tax? If deferred tax is included, does it comprise only the profit or loss element, or also changes in deferred tax recognised in other comprehensive income? Alternatively, should it include only the tax cash-flows made in the relevant period?
In respect of tax, credit institutions should be able to identify to which tax authorities the current tax has been paid/is payable. FEE suggests that the deferred tax should be excluded as it might be very arbitrary and unclear to which national tax authority it relates.
Article 89(1)(d) and (e) Directive 2013/36/EU (CRD) require the public disclosure of 'profit or loss before tax' and 'tax on profit or loss'. Recital 52 also explains that increased transparency regarding 'profits made [and] taxes paid' is essential for regaining the trust of citizens of the Union in the financial sector.
Therefore, while recognising the need for reporting institutions to comply with the national requirements imposed by the Member States when transposing Article 89 into their national law, it seems that transparency and comparability are best served when institutions' disclosures include tax information separately on a cash basis (taxes paid) and on an accrued basis (taxes accounted for) which in the latter case would only include current tax expense and not include deferred taxes or provisions for uncertain tax liabilities. Where appropriate, institutions should explain any differences with the financial statements, in the interest of transparency and comparability.
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General for Financial Stability, Financial services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Update 26.03.2021: This Q&A has not yet been reviewed by the European Commission in the light of the changes introduced to Directive 2013/36/EU (CRD).