Luxembourg amends the CbCR obligations relating to exchange of information

20/05/19

In brief

On 18 March 2019 a new grand-ducal regulation (règlement grand-ducal) was published by the Ministry of Finance. It amends the revised regulation published on 20 February 2018, regarding the Luxembourg Country-by-Country Reporting (CbCR) regime. The new regulation amends the list of jurisdictions with which the Luxembourg Tax Authorities (LTA) will exchange Country-by-Country (CbC) reports.
Groups with any affiliates in Luxembourg, but with the ultimate group parent resident in a jurisdiction not listed in the new regulation, can consider that: a “surrogate filer” should be appointed in Luxembourg, or in a jurisdiction 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”. Finally, there may be cases where a one-sided “non-reciprocal” CbCR filing and exchange situation arises. Although “non-reciprocal” countries are not referred to in the grand-ducal regulation, CbCR filing in such jurisdictions may avoid potential difficulties with “surrogate” or “secondary mechanism” filings in Luxembourg being rejected.

In detail

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 LTA. Other Luxembourg entities, members of MNE groups, might 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, where 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 established by way of a grand-ducal regulation.

A revised grand-ducal regulation has been issued on 12 March 2019 and published on 18 March 2019 (Mémorial A N° 163). It amends the revised grand-ducal regulation dealing with this aspect, published on 20 February 2018. The official text is available at this link.

Please refer to the PwC Flash News of 13 March 2018 and 20 September 2018 commenting the former regulation and its revision:

The list of “exchanging” jurisdictions, and the date from which they are to be regarded as such, has been amended and updated as follows:

  • China - together with Argentina, Chile, Iceland and Uruguay - is now part of the list of “exchanging” countries as from 1 January 2017.
  • Andorra and Monaco are added to the list of exchanging countries, as from 1 January 2018.
  • Mauritius will be considered as an exchanging country, but only from 1 July 2018.
  • Hong Kong will be considered as an exchanging country, but only as from 1 January 2019.

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:

1. Australia

11. Denmark

21. Indonesia

31. Malaysia

41. Russia

2. Austria

12. Estonia

22. Ireland

32. Malta

42. Singapore

3. Belgium

13. Finland

23. Isle of Man

33. Mexico

43. Slovak Republic

4. Brazil

14. France

24. Italy

34. Netherlands

44. Slovenia

5. Bulgaria

15. Germany

25. Japan

35. New Zealand

45. South Africa

6. Canada

16. Gibraltar

26. Jersey

36. Norway

46. Spain

7. Colombia

17. Greece

27. Korea

37. Pakistan

47. Sweden

8. Croatia

18. Guernsey

28. Latvia

38. Poland

48. Switzerland

9. Cyprus

19. Hungary

29. Liechtenstein

39. Portugal

49. United Kingdom

10. Czech Republic

20. India

30. Lithuania

40. Romania

50. United States of America

For CbCR for fiscal years beginning on or after 1 January 2017, the following jurisdictions are now listed:

1.  All the jurisdictions listed above (i.e. as from 1 January 2016)

2.  Argentina

3.  Chile

4.  China

5.  Iceland

6.  Uruguay

For CbCR for fiscal years beginning on or after 1 January 2018, the following jurisdictions are now listed:

1. All the jurisdictions listed above (i.e. as from 1 January 2016 and 1 January 2017)

2. Andorra

3. Monaco

For CbCR for fiscal years beginning on or after 1 July 2018, the following jurisdictions are now listed:

1. All the jurisdictions listed above (i.e. as from 1 January 2016, 1 January 2017 and 1 January 2018)

2. Mauritius

For CbCR for fiscal years beginning on or after 1 January 2019, the following jurisdictions are now listed:

1. All the jurisdictions listed above (i.e. as from 1 January 2016, 1 January 2017, 1 January 2018 and 1 July 2018)

2. Hong Kong

Based on the information made available by the OECD (https://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.

However, we understand that the grand-ducal regulation only indicates that exchange of information will take place from Luxembourg to each of the other jurisdictions listed. Nevertheless, if an MNE Group has an Ultimate Parent Entity in a jurisdiction not listed in the grand-ducal regulation, but in one where there is in practice an exchange of information from the other jurisdiction to Luxembourg, in principle a CbC report would still be being exchanged with Luxembourg. Therefore, it is important to realise that there are jurisdictions which are exchanging CbC reports with Luxembourg, although Luxembourg may not be exchanging with such countries, i.e. so-called "non-reciprocal" jurisdictions. These include jurisdictions such as Bermuda or Cayman Islands, currently not listed in the grand-ducal regulation. Furthermore, because this route exists for Luxembourg to have information exchanged to it, the LTA may not accept that groups with Ultimate Parent Entity in such jurisdictions can satisfy their CbCR obligations by using a Luxembourg group entity as a “surrogate entity” filing in Luxembourg.

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.

In conclusion

Luxembourg resident entities 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 or in one of the non-reciprocal jurisdiction. If this is not the case, additional CbCR filing requirements, including revision of notifications already filed, will almost certainly now have arisen.

Therefore, we recommend all Luxembourg entities members of MNE groups subject to the CbCR Law, to review again the status of their CbC reports and CbCR notifications in the light of this revised regulation.

1. PwC Luxembourg (www.pwc.lu) is the largest professional services firm in Luxembourg with 2,870 people employed from 76 different countries. PwC Luxembourg provides audit, tax and advisory services including management consulting, transaction, financing and regulatory advice. The firm provides advice to a wide variety of clients from local and middle market entrepreneurs to large multinational companies operating from Luxembourg and the Greater Region. The firm helps its clients create the value they are looking for by contributing to the smooth operation of the capital markets and providing advice through an industry-focused approach.

2. The PwC global network is the largest provider of professional services in the audit, tax and management consultancy sectors. We are a network of independent firms based in 158 countries and employing over 250,000 people. Talk to us about your concerns and find out more by visiting us at www.pwc.com and www.pwc.lu.

Contact us

Marc Rasch

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

Caroline Goemaere

Partner, PwC Luxembourg

Tel: +352 49 48 48 3002

Christophe Hillion

Transfer Pricing Partner, PwC Luxembourg

Tel: +352 49 48 48 2031