Country-by-Country (CBC) reporting is a crucial aspect of international tax transparency, aimed at providing tax authorities with a comprehensive overview of multinational enterprises’ (MNEs) global operations. In Luxembourg, adherence to CBC reporting requirements is vital for companies operating within its jurisdiction. This article will outline the key aspects of CBC reporting in Luxembourg, helping businesses understand their obligations and ensuring compliance with local regulations.

Country-by-Country Reporting is part of the Base Erosion and Profit Shifting (BEPS) initiative developed by the Organisation for Economic Co-operation and Development (OECD). It requires multinational companies to disclose relevant financial and operational information on a country-specific basis.

Luxembourg’s CBC Reporting Requirements:

1. Applicability:
   • CBC reporting in Luxembourg applies to multinational groups with consolidated revenue exceeding €750 million.
   • The reporting entity, typically the ultimate parent company, must be tax resident in Luxembourg.
2. Reportable Information:
   • Luxembourg follows OECD guidelines, requiring the disclosure of key financial and economic data, including revenue, profit or loss before income tax, income tax paid and accrued, stated capital, accumulated earnings, and tangible assets.
3. Filing Deadline:
   • The CBC report must be filed within 12 months from the end of the reporting fiscal year.
4. Reporting Format:
   • Luxembourg’s tax authorities generally require CBC reports to be submitted electronically, following the XML schema as per OECD guidelines.
5. Penalties for Non-Compliance:
   • Failure to comply with CBC reporting obligations may result in penalties. Therefore, it is crucial for companies to ensure timely and accurate submissions.
6. Confidentiality and Data Security:
   • Luxembourg places significant importance on the confidentiality and protection of sensitive information. Businesses must be aware of data security measures when submitting CBC reports.
7. Collaboration with Tax Authorities:
   • Luxembourg encourages collaboration between taxpayers and tax authorities. Businesses are advised to engage in open communication to address any concerns or queries during the CBC reporting process.
8. Transfer Pricing Documentation:
   • While CBC reporting provides a high-level overview, Luxembourg also requires detailed transfer pricing documentation to support the reported figures. This includes master files, local files, and country-specific documentation.

Practical Steps for Businesses:

1. Assessment of Group Structure:
   • Companies should evaluate their group structure to determine the entities falling under the CBC reporting requirements.
2. Data Collection and Analysis:
   • Robust data collection mechanisms are essential for compiling accurate CBC reports. Businesses must ensure the consistency and reliability of the information presented.
3. Implementation of Compliance Procedures:
   • Establishing internal procedures for CBC reporting compliance is crucial. This includes appointing responsible personnel, conducting periodic reviews, and maintaining documentation.
4. Engagement with Tax Advisors:
   • Seeking guidance from tax advisors with expertise in Luxembourg’s regulations can be beneficial. They can assist in interpreting local requirements and ensuring accurate compliance.

Country-by-Country Reporting in Luxembourg is an integral component of the global effort to enhance tax transparency. Businesses operating in the Grand Duchy need to be well-versed in the specific requirements outlined by Luxembourg’s tax authorities. By proactively addressing these obligations and maintaining open communication with relevant stakeholders, companies can navigate the CBC reporting landscape effectively, fostering a transparent and compliant business environment.