On 19 July 2023, a draft law No. 8158 (the “Draft Law”) aiming at implementing the Council Directive (EU) 2021/2101 of 24 November 2021 amending Directive 2013/34/EU on the communication by certain undertakings and branches of income tax information (the “Directive”) has been submitted to the Luxembourg Parliament (Chambre des Députés).
The purpose of this Draft Law is to introduce (i) into the Luxembourg Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings an obligation for multinational groups and standalone undertakings whose turnover exceeds a certain amount to report certain income tax information annually and (ii) into the Luxembourg Law of 10 August 1915 on Commercial Companies (“LCC”) penalties lying on legal representatives of such undertakings for non-compliance to their reporting obligation.
The reporting obligation applies to ultimate parent undertakings (i.e. an undertaking which draws up the consolidated financial statements of a largest body of undertakings) and standalone undertakings established in Luxembourg and organised in the form of a:
- Public limited company (société anonyme);
- Partnership limited by shares (société en commandite par actions);
- Limited liability company (société à responsabilité limitée);
- General partnership (société en nom collectif) or limited partnership (société en commandite simple) where all the direct or indirect partners have limited liability due to the fact that they are incorporated as a company with a limited liability.
The ultimate parent undertakings concerned by this reporting obligation are those with a consolidated turnover, reflected in their consolidated financial statements, exceeding for each of the last two consecutive financial years a total of EUR 750.000.000. The same applies to standalone undertakings whose turnover exceeds this threshold for each of the last two consecutive financial years.
Finally, this reporting obligation applies to branches opened in Luxembourg by undertakings that are not governed by the law of a Member State but that have a legal form comparable to companies with limited liability and whose turnover exceeded the amount of EUR 8.800.000 for each of the last two consecutive financial years.
The report on income tax information shall include information relating to all the activities of the standalone undertaking or ultimate parent undertaking, including those of all affiliated undertakings consolidated in the financial statements in respect of the relevant financial year, meaning:
- the name of the ultimate parent undertaking or the standalone undertaking, the financial year concerned, the currency used for the presentation of the report and, where applicable, a list of all subsidiary undertakings consolidated in the financial statements of the ultimate parent undertaking, in respect of the relevant financial year, established in the European Union (“EU”) or in tax jurisdictions included in Annexes I and II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes;
- a brief description of the nature of their activities;
- the number of employees on a full-time equivalent basis;
- the turnover;
- the amount of profit or loss before income tax;
- the amount of income tax accrued during the relevant financial year;
- the amount of income tax paid on a cash basis; and
- the amount of accumulated earnings at the end of the relevant financial year.
Publication and accessibility
The report must be filed and published in the Luxembourg Business Register (“LBR”) within a period of 12 months as from the end of the financial year to which it relates. This report must also, in principle, be made accessible to the public, free of charge, within the same period of time, on the website of the undertaking concerned.
Exemptions to the reporting obligation
The undertakings concerned have the option of temporarily omitting one or more specific items of information otherwise required to be disclosed from the report where such disclosure would be seriously prejudicial to their commercial position. However, all information omitted shall be made public in a later report on income tax information, within no more than 5 years as of the date of the original omission.
Undertakings are exempt from the obligation to publish the report on their website if this report is simultaneously made accessible to the public in an electronic reporting format, on the website of the LBR and free of charge to any third party located within the EU.
The Draft Law provides for the amendment of Article 1500-2 of the LCC so that managers or directors who have not drawn up, published or made accessible the report on income tax information, within 12 months of the end of the financial year to which it relates, will be liable to a fine of between EUR 500 and EUR 25.000. The same penalty will apply to the permanent representatives of the undertaking for the branch’s activity.
Member States are required to transpose the Directive by 22 June 2023 at the latest and it will apply to financial years beginning on or after 22 June 2024. In practice, for undertakings with a financial year corresponding to the calendar year, the first report on income tax information will relate to the financial year 2025 and will have to be published before the end of 2026.