Luxembourg implements Public Country-by-Country Reporting Directive
02/10/23
In Brief
On 15 August 2023, the Law implementing the European Union (EU) directive regarding the Disclosure of Income Tax Information by Certain Undertakings and Branches (2021/2101) (the Public Country-by-Country Reporting (CbCR) Directive) has been signed and published on 22 August 2023 in Memorial A532 in Luxembourg.
Based on the new published law, the Public CbCR will take effect in Luxembourg for accounting periods beginning on or after 22 June 2024.
In scope of the Public CbCR are multinational enterprises (MNEs) based in the EU and non-EU- based MNEs doing business in the EU through a branch or subsidiary with a consolidated annual revenue of at least EUR 750 million for two consecutive years. MNEs falling in scope will be required to publicly disclose their CbCR.
The Public CbCR will be an additional requirement for MNEs besides the existing CbCR reporting that is in place since 23 December 2016.
What are the requirements of the public CbCR bill?
Who is concerned?
- EU-based MNEs and non-EU-based MNEs doing business in the EU through a branch or subsidiary with total consolidated revenue of more than EUR 750 million in each of the last two consecutive financial years.
What to disclose?
- Among others, information on the amount of income, profit before tax, corporate tax payable and withholding tax on a per-country basis.
How to publish?
- The report must be publicly disclosed in one of the EU official languages and deposited each year:
- On the website of the Ultimate Parent Entity (UPE) or the standalone undertaking; or
- In the Register of Commerce and Companies (registre de commerce et des sociétés), if available free of charge for a five-year period.
Exemptions
- In line with the possibility offered by the Public CbCR Directive, Luxembourg has opted to allow companies to temporarily (up to five years) omit specific data from the declaration in cases where this would be particularly detrimental to the company's commercial position.
- EU Banks already disclosing information within the scope of the CRD IV.
Public CbCR – Additional requirements for public CbCR
The Public CbCR is a separate filing requirement than the existing CbCR. We hereby summarise the main different requirements.
| Main Characteristics | 2016 CbCR regulation | Public CbCR (2024) |
| Type of disclosure | Luxembourg tax authorities | Website of the UPE or standalone undertaking |
| Reporting entity | Ultimate Parent | Ultimate EU Parent; or Standalone EU entity; Qualifying EU entities (in case of non-EU parented group) |
| Minimum threshold | EUR 750 M in previous fiscal year | EUR 750 M for two consecutive fiscal years |
| Revenues information | Separately for related and unrelated parties (by jurisdiction) |
Aggregated revenues (by jurisdiction) |
| Penalties | EUR 250,000 | Liability for board members – penalty between EUR 500 to EUR 25,000 |
Public CbCR and Environmental, Social and Governance
As part of a broader consideration on tax strategy, tax transparency, and tax governance, Public CbCR is one of the first global legislative initiatives requiring MNEs to publicly disclose elements of their tax affairs to various stakeholders. MNEs should take the opportunity of the Public CbCR to reflect on their tax strategy, review their tax governance and establish a public tax transparency policy as an element of their wider ESG strategy.
Conclusion
The Public CbCR is an additional filing obligation for MNEs. The disclosure of information to the public will be a new phase in the push for more transparency. However, interpretation of the information may be challenging as it is on aggregated basis, so MNEs may have to consider how to best explain their disclosure to mitigate misinterpretations.
