The move, if approved by the European Parliament and EU states, would bring the bloc in line with a similar measure approved by the United States in its Dodd-Frank Act.
"We want to know what they pay, to whom and why," EU financial services chief Michel Barnier told a webcast news conference from Strasbourg, France.
The law will affect about 600 listed and large non-listed companies in the extractive industries to cover production entitlements, taxes on profits, royalties, dividends, discovery and production bonuses, fees such as those for licences and other direct benefits.
The aim is to hold governments to account for income from the exploitation of natural resources such as minerals, oil, gas and forestry.
The EU plans to go further than Dodd Frank, which only applies to listed companies and excludes the logging sector. The EU plans exclude conflict minerals disclosure covered in the US rules.
UK accounting body ICAEW said the plan could backfire.
"Our starting point in this debate has always been that mandating country-by-country disclosures within general purpose financial reports prepared primarily to meet the information needs of investors would not be appropriate and might lead overall to less transparency, not more, ICAEW's head of financial reporting faculty, Nigel Sleigh-Johnson said.
Stealth acquisitions
The reform of EU transparency requirements for listed companies will also plug a gap whereby financial instruments used to acquire stakes in a company do not have to be notified.
The European Commission cited the example of luxury goods company LVHM announcing last October it had built a 17.1% stake in rival Hermes at a purported 50% discount by using cash-settled equity swaps.
"Consequently LVHM acquired significant interest in Hermes without Hermes and the market being aware," the Commission said.
This could create possibly incorrect market pricing of Hermes shares, it added. All major holdings of financial instruments that could be used to build up stakes in listed firms would have to be disclosed under the new law.
Cutting red tape
Under the draft law, no EU state could make quarterly reporting mandatory for any listed company but firms could continue reporting every three months if they want to.
Half yearly and annual results would remain mandatory.
Barnier also proposed replacing two of the bloc's accounting laws with an updated single set of rules to abolish the audit requirement for unlisted small firms.
The proposed "mini-regime" would save 1.1 million small companies €1.5 billion across the EU by only having to report a simpler profit and loss account, balance sheet and a limited number of explanatory notes.
The definition of a small firm would also be widened so that more firms fall into this category.
