BEPS: Luxembourg Law of 23 December 2016

In the context of action 13 of the base erosion and profits shifting (“BEPS”) action plan, Luxembourg Parliament adopted the Law dated 23 December 2016 implementing country-by-country reporting requirements for entities that are part of a multinational enterprise group (“MNE Group”) (“CBCR Law”) implementing the Council Directive (EU) 2016/881 of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation.

A) MNE Groups concerned

MNE Groups are subject to the provision of the CBCR Law provided the total consolidated revenue of the MNE Group amounts to at least EUR 750 million as of January 2015 during the fiscal year preceding the reporting fiscal year.

MNE Groups with a consolidated group revenue lower than EUR 750 million are considered as excluded MNE Groups and are thus not subject to reporting.

B) Reporting entities

Luxembourg resident entities ("Reporting Entity") shall file a country-by-country-report ("Report") with the Luxembourg tax authorities if that entity is either:

1. The "Ultimate Parent Entity" of a MNE Group (meaning that it prepares consolidated financial statements under accounting principles generally applied in Luxembourg or would be required to do so if its equity interests were traded on a public securities exchange;

2. A "Surrogate Parent Entity" appointed by the MNE Group, as a sole substitute for the non-Luxembourg Ultimate Parent Entity when:

• the Ultimate Parent Entity of the MNE Group is not obliged to file a Report in its tax residence jurisdiction; or
• the jurisdiction in which the Ultimate Parent Entity is resident for tax purposes has no qualifying competent authority agreement in force with Luxembourg; or
• there has been a systemic failure of the jurisdiction of the tax residence of the Ultimate Parent Entity that has been notified by the Luxembourg tax administration to the Luxembourg resident constituent entity¹ .

3. Any Luxembourg tax resident entity if one of the above conditions under 2.a. to c. applies.

C) Reportable information

The CBCR Law requires the Reporting Entity to provide (i) information on revenues (excluding, however, payments qualifying as dividends under the law of source of such dividend), profits, taxes paid, capital, earnings, employees, and tangible assets on a country-by-country basis (ii) the list by country of the entities forming part of the MNE Group and their principal activity and (iii) any other information that the MNE Group deems necessary.

D) Notification

Each Luxembourg resident constituent entity of an MNE Group shall, before the end of the relevant financial year (except for 2016 where the tax authorities postponed the notification to the 31 March 2017) notify its status to the Luxembourg tax administration, i.e. whether it is a Reporting Entity or is not a non-reporting entity, in which case it shall identify the Reporting Entity.

The notification must be performed by the relevant entities on an electronical platform via the government portal "guichet.lu".

E) Filing of the Report and exchange of information

The first Report relating to the 2016 fiscal year information is to be filed with the Luxembourg tax authorities within 12 months from the end of the relevant fiscal year (i.e. 31 December 2017 for a fiscal year-end on 31 December 2016).

The exchange of information by the tax authorities shall then be made within 15 months from the end of the relevant fiscal year (except for the exchange of information related to the 2016 fiscal year which shall be made within 18 months therefrom).

A Grand-Ducal decree listing the country with which Luxembourg will exchange the information is still to be published.

F) Penalties

Each Reporting Entity or constituent entity can incur a fine of up to EUR 250,000 in case of failure to file or late filing of the Report.

G) Automatic exchange of information

The Luxembourg tax administration shall then exchange the information so collected by means of automatic exchange.