Luxembourg Business Journal, February 2017

Luxembourg country-by-country reporting requirements: Which implications for Investment Funds?

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The Luxembourg Parliament passed a law on 13 December 2016 in order to implement the European Union Directive of 25 May 2016 on country-by-country reporting (“CbCR”).

Under this legislation, Investment Funds owning Luxembourg companies may be subject to CbCr in Luxembourg for financial years starting on or after 1 January 2016 when the two cumulative conditions listed below are met.

  • The Luxembourg company belongs to a group of entities which is either legally required to prepare consolidated financial statements or would be required to do so if equity interests in any of the enterprises of this group were listed; and
  • The annual consolidated turnover of this group of entities is at least EUR 750 million.

 Identifying potential CbCR obligations of Luxembourg companies will require Investment Funds to analyze whether their Luxembourg companies meet these conditions.

 Identifying Luxembourg CbC reporting requirements

 The identification of Luxembourg CbCR requirements can become a complex exercise when the Luxembourg companies do not belong to a group of entities already required to prepare consolidated financial statements, although they may still belong to a group. In order to identify potential Luxembourg CbCR requirements applicable to these Luxembourg companies, a hypothetical analysis under applicable generally accepted accounting principles (“GAAP”), such as International Financial Reporting Standards (“IFRS”), needs to be conducted.

 The hypothetical analysis under applicable GAAP will result in CbCR requirements in Luxembourg when (i) the Luxembourg companies belong to a group of entities which would be required to file consolidated financial statements if the group were listed, (ii) the consolidation would not be performed at fair value and (iii) the annual consolidated turnover of the group would be at least EUR 750 million. The chart below summarizes the steps of this analysis.

Luxembourg country-by-country reporting requirements

Complying with Luxembourg CbCR requirements

 Luxembourg companies in the scope of the CbCR requirements will be able to meet their obligations by either filing a CbCR report with the Luxembourg tax authorities or relying on the CbCR report filing made by the ultimate parent entity or surrogate parent entity of the group under certain conditions; i.e., mandatory CbCR obligations in force in the country of residence of this entity and effective automatic exchange of CbCR information between the country of residence of this entity and Luxembourg.

 How EY can help?

 Determining if CbCR is applicable to Investment Funds requires review and analysis from an IFRS standpoint of the investment portfolios held by these funds in order to determine to which extent CbCR obligations may arise, either in Luxembourg or other jurisdictions where CbCR requirements are applicable. The Luxembourg Tax Desks in the US and the EY Luxembourg Transfer Pricing team can assist in assessing CbCR requirements applicable to Investment Funds in Luxembourg. Please do not hesitate to contact us for more information about these services.