Luxembourg Tax Alert 2023-02

On 24 February 2023, two bills were filed with the Luxembourg Parliament. The first bill (bill 8158) (PDF, 0.8MB) concerns the implementation of public country-by-country reporting (“public CbCR”) which transposes the provisions of the EU Directive on public CbCR into Luxembourg domestic law. The second bill (bill 8160)(PDF, 1.2MB) is the ratification bill on the new Luxembourg - United Kingdom (“U.K.”) Income and Capital Tax Treaty (“DTT”). 

On 21 December 2021, the EU Directive on public CbCR entered into force and must now be transposed by EU Member States into domestic law by 22 June 2023. This Directive introduces a new requirement for multinational groups, whose total consolidated group revenues exceed EUR 750 million in each of the two preceding consecutive financial years, to report certain tax and related group information in an EU Member State’s commercial business register and on the company’s website. The rules will apply to multinational groups that have either their ultimate parent undertaking in an EU country, or that have operations in the EU through an EU subsidiary or branch of a certain size.

The Luxembourg transposition bill is line with the requirements of the EU Directive.

The bill specifies that it will only be applicable to entities that are covered by the EU Accounting Directive (Directive 2013/34/UE), meaning:

• limited companies (Luxembourg SA, SCA, and S.à r.l.);
• partnerships (SNC and SCS), provided their direct or indirect partners, who are indefinitely liable, are organized as limited companies; and
• Luxembourg branches of multinational groups or autonomous companies established outside of the E.U.

A carve-out applies to those groups that only operate in a single EU Member State. The financial sector, under certain conditions, may also be excluded from the new requirement, provided they report under article 89 the Capital Requirements Directive IV (“CRD IV”).

The information to be reported as part of the CbCR includes seven key areas, including a short description of the activities undertaken, the number of employees, net turnover, profit and loss before tax, tax accrued, tax paid and the amount of accumulated earnings. The information will need to be broken down for each of the EU Member States in which the group is active, for those jurisdictions that are included in Annex I of the EU list of non-cooperative jurisdictions (EU “blacklist”) or that have been in Annex II of the EU list of non-cooperative jurisdictions (EU “grey” list) for a minimum of two years. For all other jurisdictions, the information can be reported on an aggregated basis.

The report has to be made available within 12 months after the end of the financial year on the company’s website (for a minimum of five years) and in the Luxembourg Trade and Companies Register.

The EU Directive provides for two options that can be taken by EU Member States:

• Option one: allowing companies to defer the publication of certain information for a maximum period of five years, when this publication would be seriously prejudicial to the commercial position of the companies. Any omission must be clearly indicated in the report and duly substantiated.
• Option two: to exempt companies from the obligation to publish the public CbCR report on their website, provided that the report is made available to the public, in an electronic format and free of charge, on the website of the Luxembourg Trade and Companies Register.

Luxembourg has included both options in the bill. 

The bill now has to follow the usual process to become law. The transposition deadline set by the EU is 22 June 2023. Once adopted and published in the Luxembourg Official Gazette, it would become effective as from 22 June 2024. In practice, this means that for companies having a calendar year end, the first report will concern the fiscal year 2025 and the report must be published before the end of 2026.

Public CbCR shows that we continue to move forward into a world requiring more and more tax transparency. It is already important today to consider the impact of this new bill and what kind of data will soon be available to the public, including the story that this will tell about your group and its tax burden. KPMG is happy to assist you with a preliminary assessment to help you prepare for these new requirements.

If you are looking for more information on this EU Directive, please refer to this KPMG website and KPMG on a page Overview (PDF, 3.8MB).

The new Luxembourg-U.K. DTT includes several new provisions. This mainly includes the treatment of pension funds and Luxembourg CIVs as tax residents for the purpose of the DTT, a withholding tax exemption for dividends and royalties, and a new land-rich clause (with tax credit method to avoid double taxation) impacting the real estate sector.

A full overview can be found in our Luxembourg Tax Alert 2022-06.

The UK ratification bill was voted in 2022. Should the Luxembourg ratification bill be voted through this year, the new treaty would become applicable as from 1 January 2024 with respect to Luxembourg taxes and UK withholding tax and as from April 2024 with respect to UK income, capital gain and corporation taxes (please refer to our previous tax alert for more details).

Please do not hesitate to get in touch with a KPMG tax professional in case you have any questions.