On 27 December 2016, the country-by-country reporting (‘CBCR’) law (the ‘CBCR Law’) has been published, together with an FAQ issued by the Luxembourg direct tax authorities. The CBCR Law came into effect on 1 January 2017.
Any Luxembourg entity:
- which, ultimately, is the parent company of a multinational enterprise (‘MNE’) group with a consolidated group revenue of at least EUR 750,000,000 during the precedent tax year; and
- preparing consolidated financial statements or which would be required to do so if its equity interests were traded on a public stock exchange;
falls within the scope of the CBCR Law and is required to prepare and file a country-by-country report with the Luxembourg tax authorities within 12 months after the end of each tax year of the MNE group.
It should also be noted that a Luxembourg tax resident entity elected as substitute for the non-Luxembourg ultimate parent entity of an MNE group also falls within the scope of application of the CBCR Law, as well as any Luxembourg tax resident entity satisfying the following criteria:
- the non-Luxembourg ultimate parent entity of the MNE group is not obliged to file a CBC report in its own tax jurisdiction;
- the jurisdiction of tax residence of the non-Luxembourg ultimate parent entity of the MNE group has no agreement with Luxembourg in effect at the time of the CBCR filing; or
- the non-Luxembourg ultimate parent entity of the MNE group is requested to submit the CBC report, and there is an agreement with Luxembourg but one that has been suspended or there is a systemic failure in the foreign jurisdiction to automatically exchange the CBC reports.
The CBCR Law may also impact alternative funds or investment structures.
The information to be provided is as follows:
- per tax jurisdiction: an overview of the revenues generated with unrelated and related parties and, in total, the profit (or loss) before income tax, income taxes paid and accrued, stated capital, accumulated earnings, the number of employees and the book value of tangible assets;
- the resident constituent entities for each tax jurisdiction, any different jurisdiction of an organisation or incorporation of a resident entity and the main business activity of each entity;
- any additional information that is deemed necessary to be reported by the multinational group.
Failure to comply with the CBCR Law provisions may trigger a penalty up to EUR 250,000.