On 13 December 2016, Luxembourg parliament has, in a first vote, adopted the bill of law to implement the European Directive 2016/881/EU on country-by-country reporting by multinational enterprise groups. If a second vote is dispensed with, which we expect it will be, the law will be published in the Official Gazette of the Grand Duchy of Luxembourg and enter into force three days after its publication therein. We expect that the law will be in force before 1 January 2017.
Under the country-by-country reporting law, a Luxembourg tax resident ultimate parent entity of a multinational enterprise group with a consolidated turnover amounting to at least EUR 750 million in the preceding year (a CbC Reporting Group) must annually file a country-by-country report with the Luxembourg tax authorities. The ultimate parent entity is the entity that owns directly or indirectly a sufficient interest in one or more entities of the group, such that it is required to prepare consolidated accounts (or would be so required if its equity interests were traded on a public securities exchange) and no other entity of the multinational enterprise owns such interest in the first-mentioned entity. Further, any other Luxembourg tax resident entity or Luxembourg situated permanent establishment of a CbC Reporting Group must file a country-by-country report with the Luxembourg tax authorities if Luxembourg does not receive a country-by-country report from another country or from a relevant designated Luxembourg entity (e.g. if the ultimate parent entity is tax resident in a jurisdiction that does not (yet) oblige it to file a country-by-country report).
Country-by-country reports must be filed within 12 months after the end of the relevant fiscal year for which the country-by-country report is prepared. The first country-by-country report needs to be filed for fiscal years starting on or after 1 January 2016 and will therefore need to be filed in 2017 if the fiscal year coincides with the calendar year. Further, a Luxembourg taxpayer of a CbC Reporting Group must notify the Luxembourg tax authorities which entity of the multinational enterprise group is required to file the country-by-country report. This notification must be submitted no later than the last day of the relevant fiscal year. The first notification should therefore in principle be made at the latest on 31 December 2016 if the fiscal year coincides with the calendar year. We expect however that Luxembourg will extend the first notification deadline when the law is published in the Official Gazette of the Grand Duchy of Luxembourg, and give detailed instructions on submitting the notification as well.
Failure to comply, late compliance and incomplete compliance with the country-by-country reporting law obligations are punishable with a fine up to a maximum amount of EUR 250,000.
The Luxembourg tax authorities will exchange a country-by-country report with all countries, that (i) are included in the report as a country in which the CbC Reporting Group is present through one or more entities or permanent establishments, and (ii) are a Member state of the EU or a jurisdiction with which Luxembourg has entered into an agreement to exchange country-by-country reports.