EU Directive Imposes Mandatory Reporting on Banks and Financial Entities
On April 14, 2025, the EU adopted Directive (EU) 2025/872, amending Directive 2011/16/EU on administrative cooperation in taxation. One of the most impactful changes introduced by this reform is a new automatic exchange of information obligation for financial institutions, including banks, investment firms, fund managers, and insurance companies.
This update aligns EU law with the OECD’s Global Anti-Base Erosion (GloBE) Model Rules under Pillar Two, but goes further by imposing direct reporting duties on financial intermediaries.
Who Must Report?
The obligation falls on a broad category of financial institutions operating in the EU, including:
- Credit institutions (banks).
- Investment firms and portfolio managers.
- Collective investment undertakings (CIUs).
- Insurance companies that provide annuity or investment-based products
- Any entity classified as a "reporting financial institution" under Directive 2014/107/EU (DAC2).
This ensures coverage of both traditional and modern financial intermediaries.
What Information Must Be Reported?
Starting from tax yearsbeginning on or after 1 January 2026,financial institutions must proactively identify and report clients or account holders who are constituent entities of in-scope multinational enterprise (MNE) groups, specifically those subject to the GloBE rules (Pillar Two) with consolidated revenues above €750 million.
They must report the following details to their national tax authority:
- The name and tax identification number (TIN) of each constituent entity.
- The jurisdiction of tax residence.
- Account identifiers (IBAN or other financial account number).
- Whether the entity is theUltimate Parent Entity, Partially Owned Parent Entity, or other constituent entity.
- Any other information necessary to determine if the client is subject to top-up tax under Directive (EU) 2022/2523.
In short: this is a tax credit, not a special regime.
Purpose and Use of the Data
Tax authorities across the EU willautomatically exchange this information, which enables them to:
- Cross-check GloBE Information Returns (GIRs).
- Detect non-compliance or underreporting.
- Ensure that top-up taxes are levied when the effective tax rate is below 15% at group level.
This reporting also allows Member States to identify which constituent entities are located in their jurisdiction,,even if the top-up tax return was filed elsewhere.
Legal Basis and Enforcement
his new reporting duty is enshrined in Article 8(3a) of Directive 2011/16/EU, as amended. Member States are obliged to transpose it into national law by 31 December 2026, and begin implementation from 1 January 2027.
Sanctions for non-compliance must be "effective, proportionate, and dissuasive" – each Member State will define the specific penalties.
What This Means for Financial Institutions
Banks and financial entities in the EU will need to:
- Update their KYC and onboarding procedures from clients, particularly their group role and jurisdiction.
- Collect additional tax information from clients, particularly their group role and jurisdiction
- Establish internal reporting mechanisms to transfer this data to tax authorities on an annual basis
- Train staff on the new compliance duties related to Pillar Two and DAC8
Failure to comply may result in reputational risk and financial penalties.
How Strong Abogados Can Help
We assist financial institutions, fund managers, and compliance teams with:
- Implementation of reporting procedures under DAC8 and Pillar Two
- KYC updates to identify constituent entities
- Communication with tax authorities and submission of reports
- Cross-border advisory for MNE groups affected by these rules
Failure to comply may result in reputational risk and financial penalties.