The new regulation amends the list of jurisdictions with which the Luxembourg Tax Authorities (LTA) will exchange Country-by-Country (CbC) reports. For groups with any affiliates in Luxembourg, but with the ultimate group parent resident in a jurisdiction that is not listed in the new regulation, either a "surrogate filer" should be appointed in Luxembourg or in a jurisdiction that is on the list (i.e. one with which Luxembourg can automatically exchange information), or a CbC report has to be filed in Luxembourg under the "secondary mechanism".
The Luxembourg CbC obligations require Luxembourg ultimate parent entities controlling a Multinational Enterprise group (MNE group) whose total consolidated group revenue ("chiffre d’affaires total consolidé") exceeds EUR 750 million, to file CbC reports with the Luxembourg tax authorities. Other Luxembourg entities that are members of MNE groups may also have obligations to file CbC reports in Luxembourg. Both Luxembourg MNE group parents, and other Luxembourg entities that are member of MNE groups, must also comply with annual notification requirements, this being a separate obligation.
Under the Luxembourg CbCR legislation (CbCR Law), the LTA will exchange annually on an automatic basis the CbC report received from any Luxembourg reporting entity in an MNE group, with all the tax authorities of other jurisdictions where that MNE group has activities. However, a CbC report can only be exchanged in cases where both tax authorities have agreed to automatic exchange, a mechanism for this is effective, and their respective jurisdictions have in place legislation that requires the filing of CbC reports with respect to that fiscal year to which the CbC report relates.
The list of such "exchanging" jurisdictions is to be established by way of a grand-ducal regulation.
A revised grand-ducal regulation (Mémorial A N° 569), has been issued on 9 July 2018, and published on 10 July 2018. It replaces the previous grand-ducal regulation dealing with this aspect, published on 20 February 2018. The official text is available at the following link: http://legilux.public.lu/eli/etat/leg/rgd/2018/07/09/a569/jo
The list of "exchanging" jurisdictions, and the date from which they are to be regarded as such, has been amended and updated as follows:
Under the revised regulation, the full list of "exchanging" countries for CbCR purposes is now as follows. For fiscal years beginning on or after 1 January 2016, the following countries are listed:
10. Czech Republic
23. Isle of Man
35. New Zealand
43. Slovak Republic
45. South Africa
49. United Kingdom
50. United States of America
For CbCR for fiscal years beginning on or after 1 January 2017, the following jurisdictions are now listed:
Based on the information made available by the OECD (http://www.oecd.org/tax/beps/country-by-country-exchange-relationships.htm), the above jurisdictions should exchange information with Luxembourg on a similar basis, and have similar filing requirements, although the obligations might commence from a different fiscal year.
For jurisdictions not mentioned in the list, there is no appropriate exchange of information mechanism regarded as being in place with Luxembourg. Consequently, any affiliates in Luxembourg of groups where the ultimate parent is resident in a jurisdiction that is not listed above, a CbC report will have to be filed either by a "surrogate entity" resident in a jurisdiction listed in the new regulation, or by an affiliate in Luxembourg. Exceptions may apply, on a case-by-case basis, if countries mentioned in the new regulation have CbCR obligations, but starting from a different fiscal year.
Similarly, for 2016 and/or 2017, notifications filed in Luxembourg may already have confirmed that CbCR is being done by an MNE group entity, but in a jurisdiction for which, under this revised listing, there is now no appropriate exchange of information mechanism regarded as being in place. In such a case, revisions of notifications may have to be made. The amendments to the notification would need to advise that there is to be a change in the jurisdiction of the reporting entity to one listed in the revised regulation. Alternatively, the MNE group must appoint a Luxembourg entity to do the CbCR.
MNE groups should check these latest changes, to confirm that they have still made, or will make, appropriate filings of notifications and the CbC reports.
The revision of this grand-ducal regulation is part of a series of ongoing CbCR developments, as related new legislation, guidance and updates continues to emerge.
One such development comes from the transposition by Luxembourg of amendments to the EU Directive on Administrative Co-operation in the field of taxation (2016/2258) (DAC 5). The new Luxembourg legislation (Mémorial A – 651 of 6 August 2018) amends article 8 of the CbCR Law. As a consequence of this amendment, as part of their powers for verifying compliance with the CbCR Law, the LTA have now access, on demand, to all mechanisms, procedures, documents and information that has to be retained by businesses (including professional advisers) in Luxembourg in order to comply with Luxembourg's anti-money laundering legislation.
Luxembourg resident entities that are subject to the CbCR regime in any way should confirm that their MNE group entity filing the CbC report is resident in a jurisdiction listed in the new regulation. If this is not the case, additional CbCR filing requirements, including revision of notifications already filed for 2016 and 2017, will almost certainly now have arisen.
Therefore, we recommend all Luxembourg entities that are members of MNE groups subject to the CbCR Law to review again the status of their CbCR notifications and CbC reports in the light of this revised regulation.
Transfer Pricing Partner, CbCR Leader, PwC Luxembourg
Tel: +352 49 48 48 3712
Loek de Preter
Transfer Pricing Leader, PwC Luxembourg
Tel: +352 49 48 48 2023
Partner, PwC Luxembourg
Tel: +352 49 48 48 3002
Transfer Pricing Partner, PwC Luxembourg
Tel: +352 49 48 48 2031