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.
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.
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
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.