The Law transposes EU Council Directive 2016/881 of 25 May 2016 (the "Directive"), which modifies the EU Council Directive 2011/16/UE relating to mandatory automatic exchange of information in the field of taxation. The Directive implements the provisions of action 13 of the Organisation for Economic Co-operation and Development's action plan in relation to base erosion and profit shifting ("BEPS"). As such, it extends the automatic exchange of information provisions in Luxembourg by including CbC declaration requirements into local law. The main elements of the Law are summarised below.

What may you be subject to? The Law provides either reporting (under the form of a CbC report) or notification obligations for Luxembourg entities that are part of a MNE Group (as defined below) for the benefit of the Luxembourg direct tax authorities (administration des contributions directes, the "LTA") ... MORE

When will the information need to be submitted? Luxembourg entities that have to file a CbC report in accordance with the Law must file such report within 12 months as of the last day of the reporting fiscal year ... MORE

Who may be subject to declaration obligations? The entities falling within the three following categories will have to file an annual CbC report with the LTA in accordance with the Law ... MORE

What kind of information must be provided? The CbC report takes the form of 3 tables containing generally the following information ... MORE

How will the information be used by the LTA? Information provided to the LTA under the Law may only be used by the LTA to perform high-level assessments of transfer pricing risks and other risks in relation to BEPS, including assessing the risk of non-compliance by members of the MNE Group with applicable transfer pricing rules, and where appropriate for economic and statistical analysis ...MORE

What control measures are available to the LTA? The LTA will generally verify whether the information obligations provided for by the Law are complied with and whether any methods have been used by Constituent Entities of the MNE Groups to avoid the communication of such information ... MORE

What kind of sanctions may you be subject to? A penalty of maximum EUR 250,000 may be imposed on the Luxembourg entities subject to the declaration obligations provided for in the Law in the following cases ... MORE

Conclusion The Law reflects the provisions of the Directive. The declaration obligations provided therein are part of the new tools made available to the tax administrations to enhance transparency through the exchange of information with the aim to enable them to identify whether companies have engaged in transfer pricing or other practices having as effect to artificially shift substantial amounts of income into tax-advantaged environments ... MORE