All OECD and G20 countries have committed to implementing country by country reporting (CbCR). Luxembourg, among other countries, has agreed that implementing CbCR is a key priority in addressing BEPS risks. Reporting takes place with respect to fiscal periods commencing from January 1 2016 and electronic notifications are due by March 31 2017. The time is now.
Who falls into the scope of CbCR?
Any Luxembourg tax resident must file a notification with the Luxembourg tax authorities. Falling into the scope are:
- Any tax resident that is part of a multinational enterprise group with a consolidated group revenue (i.e. chiffre d’affaires total consolidé) of €750 million ($815 million) or more in the preceding fiscal year (i.e. fiscal year 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.
Yet, there are still a lot of questions on the exact scope and application of the CbCR.
For instance, does Luxembourg’s CbCR law require investment funds to file CbCR as ultimate parent entities (UPE) considering that under the accounting rules they are not included in the scope of consolidation? Similarly, for Luxembourg holding companies under private equity funds that are applying the consolidation exemption under Luxembourg GAAP and IFRS, are such entities considered as constituent entities and therefore may be considered an UPE of an MNE group and file a CbCR?
“We think that no notification and filing should be required from a Luxembourg perspective. This and other questions have been addressed with the tax directorate and we hope to receive further guidance soon,” said Marc Rasch, transfer pricing partner at PwC Luxembourg.
Beware of penalties
For fiscal year ending on December 31 2016, the first deadline of notification is due by March 31 2017. Absence, incomplete or inaccurate filing of an electronic notification may result in potential penalties up to €250,000.
The notification has to be filed electronically for each Luxembourg resident separately that falls in the scope of the CbCR. Yet, the CbCR has to be filed with the ultimate parent or a surrogate parent entity, where applicable, as of December 31 2017.
By Marc Rasch, PwC Luxembourg
Transfer pricing partner, PwC