All OECD and G20 countries have committed to implementing country-by-country reporting. Luxembourg, among other countries, has agreed that country-by-country reporting is a key priority in addressing BEPS risks. Reporting takes place with respect to fiscal periods starting from 1 January 2016. As electronic notifications are due by 31 March 2017, the time is now!
Who’s falling within the scope of country-by-country reporting
Any Luxembourg tax resident must file a notification with the Luxembourg tax authorities. Residents falling within the scope are:
- part of a Multinational Enterprise group with a consolidated group revenue (i.e. chiffre d’affaires total consolidé) of 750 million euros or more in the preceding fiscal year (i.e. FY 2015 for the first applicable year 2016), and
- for which either a Luxembourg tax resident or other entity of the Multinational Enterprise group prepares consolidated financial statements, or would be required to do so if its equity interests were traded on a public securities exchange.
The expert view
Whereas the deadline for notification is on 31 March, there are still many questions on the exact scope and application of the country-by-country reporting (CbCR) that the authorities need to answer.
For instance, does Luxembourg CbCR law require investment funds to file CbCR as Ultimate Parent Entity? This is puzzling as they are not included into the scope of consolidation under the accounting rules.
The same question applies to Luxembourg holding companies under private equity funds that are applying the consolidation exemption under Lux GAAP and IFRS. Are such entities considered as constituent entities and therefore may fall into the Ultimate Parent Entity category of an MNE Group and file a CbCR? Personally, I think that no notification and filing should be required from a Luxembourg perspective.
Beware of penalties
For fiscal year ending on 31 December 2016, the first deadline of notification is due by 31 March 2017. Absence, incomplete or inaccurate filing of an electronic notification may result in potential penalties up to 250,000 euros.
Then, each Luxembourg resident separately that falls in the scope of the CbCR must file the notification electronically. Yet, they will have to file with the ultimate parent or a surrogate parent entity, where applicable, as of 31 December 2017.
Get more details, read this newsflash.