Luxembourg: Automatic exchange of country-by-country reports among EU Member States

Draft law in Luxembourg

The Luxembourg government on 2 August 2016 filed (lodged) a draft law that would transpose, into Luxembourg law, an EU Directive introducing the mandatory automatic exchange of country-by-country (CbC) reports among EU Member States.

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With the draft law’s introduction, the Luxembourg Parliament is expected to consider the legislation that, if approved, would be effective from the tax year 2016 onwards. 

KPMG observation

The draft law is a “lean transposition” of the EU Directive—in other words, definitions are reproduced verbatim and clear references are made to the 2015 Final Report on Action 13 of the base erosion and profit shifting (BEPS) project. In particular, the draft law would apply to the financial sector (banks and investment entities), which also needs to consider the OECD guidance (29 June 2016) that clarifies the application of the CbC reporting requirements to investment funds and partnerships. The CbC report is part of the three-tiered standardised approach of the BEPS Action 13.

The Luxembourg draft law, combined with Article 171 (3) of the Abgabenordnung (Fiscal Code) requiring transfer pricing documentation for Luxembourg taxpayers since 2015, may be viewed as emphasizing the importance of the other two standards of transfer pricing documentation—the Local file and the Master file. The Local and Master files will demonstrate the compliance of mulitnational entity groups with the arm’s length principle and, at the same time, give “some color” to the rough data gathered in the CbC report, that may help avoid misinterpretations and, ultimately, bring clarity to the risk assessments conducted by tax authorities.


Read an August 2016 report prepared by the KPMG member firm in Luxembourg: Draft law for Country-by-Country Reporting in Luxembourg submitted to Parliament

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