Reminder

The application of the Directive on Administrative Cooperation (“DAC 6”) is approaching and it is important to be aware of the most important aspects of the coming new compliance regulation as follows:

A. Background
On 25 March 2020, the Luxembourg Parliament adopted the Law regarding the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements

B. Scope

A reporting intermediary must transmit the information that is within its knowledge, possession, or control in connection with the reportable cross-border arrangements.

Where there is not intermediary and there is no other intermediary responsible for the reporting obligation, then it falls on the relevant taxpayer.

An intermediary has the possibility to prove by any means that the information has already been declared by another intermediary in the same Member State or in another Member State. The Luxembourg Tax Authorities (“LTA”) will make an assessment on a case-by-case basis, based on the facts and circumstances. A written document from the competent authority of the Member State concerned is one means of proof, among others. The sole indication of the arrangement ID will in principle not be considered sufficient. The proof is provided on request to the LTA.

In that context, it is important to understand the following definitions:

• Reporting intermediary:
  1. Any person who designs, markets, or organises a reportable cross-border arrangement, or makes it available for implementation or manages its implementation.
  2. A service provider qualifies as an intermediary if he knows or could be reasonably expected to know that he has undertaken to provide, directly or by means of other persons, aid, assistance or advice with respect to designing, marketing, organizing, making available for implementation or managing the implementation of a reportable cross-border arrangement.
• Relevant taxpayer: Any person to whom a reportable cross-border arrangement is made available for implementation, or who is ready to implement a reportable cross-border arrangement or has implemented the first step of such an arrangement.
• Reportable cross-border arrangement: any cross-border arrangement linked to one or more of the types of taxes referred to in article 1 of the law of 29 March 2013 on administrative cooperation in the field of taxation and which contains at least one of the hallmarks.
• Hallmarks: Characteristics or feature of a cross-border arrangement that indicates a potential risk of tax avoidance as listed below:
  1. Generic hallmarks linked to the main benefit test
  2. Specific hallmarks linked to the main benefit test
  3. Specific hallmarks related to cross-border transactions
  4. Specific hallmarks concerning automatic exchange of information and beneficial ownership
  5. Specific hallmarks concerning transfer pricing

C. Filing obligations

A reporting intermediary or relevant taxpayer must transmit the information related to an arrangement to the LTA by electronic filing on the secure state platform, MyGuichet, using:

1. the manual entry through a specific process on MyGuichet or
2. the drag and drop of a specific XML.

D. Deadlines

A reporting intermediary or relevant taxpayer must transmit the information related to the reportable cross-border arrangement according to its implementation date as follows:

• June 25, 2018 and June 30, 2020: the deadline is 28 February 2021.
• July 1, 2020 and December 31, 2020: the deadline is 30 January 2021.
• January 1, 2021 onwards: the deadline is 30 days.

E. Penalty

The intermediary or relevant taxpayer may be liable to a fine not exceeding EUR 250,000 because of:

1. Failure to file information
2. Late filing or filing of incomplete or inaccurate data
3. Non-compliance by intermediaries.

The fine is set by the tax office for withholding tax on interest.

The deadline for filing the Country-by-Country (“CBC”) obligations is approaching and it is an opportunity to remember the basis of this compliance regulation as follows:

A. Background
On 13 December 2016, to ensure compliance with the BEPS Action Plan, the Luxembourg Parliament adopted Law of 23 December 2016 on Country-by-Country (“CBC”) reporting as one measure in connection with the automatic exchange of information (AEOI) for tax matters.

B. Scope
Multinational Enterprise (“MNE”) groups whose total consolidated turnover is higher than EUR 750 million during the fiscal year immediately falls within the scope of CBC.

C. Filing obligations
There are 2 types of annual CBC filing obligations:

• CBC notifications filed by all the Luxembourgish entities within the MNE Group to provide details on the role of the entity submitting the notification and identifies the entity
  responsible to file the CBC Report (“Reporting entity”).
• CBC report submitted by the Reporting entity for the MNE Group.

D. Deadline

• Luxembourgish entities within the MNE Group must submit annually The CBC notifications no later than the last day of the reporting fiscal year 2020 for the MNE group.
• the Reporting entity must submit the CBC report no later than 12 months after the last day of the reporting fiscal year 2019 for the MNE group.
• Therefore, the deadline is approaching for taxpayers falling in CBC obligations:

E. Penalty
A penalty may apply up to EUR 250,000.00 because of:

• Fails or late filing of the CBC Report.
• Fail or late filing of the CBC Report notification.
• Files incomplete or inaccurate information.

F. How can we help?
TFPS with a dedicated and professional Transfer Pricing team can assist with the filing of CBC notifications and reviewing of the CBC reports in line with Luxembourgish CBC and OECD regulation. For more information make click here or get in touch with our team.