LTA clarifies timing of first CBCR reporting year in case of demergers/acquisitions

On 20 August 2021, the Luxembourg tax administration (LTA) clarified the timing of the first reporting year under country-by-country reporting rules (CBCR) in case of demergers/acquisitions and the use of the “NOTIN” code.

On the CBC FAQ available on its website, the LTA has set out the CBCR treatment for multinational enterprises (MNE) in case of demergers/acquisitions.

The OECD Guidance on the Implementation of Country-by-Country Reporting BEPS Action 13 (section VI 1. Scenario 1) lets jurisdictions select one of two options in case a carve-out of a part of an existing MNE group now forms a (new) separate group: 

• Legal independence perspective: the new MNE did not legally exist as an independent group in year 0; therefore, it is not required to file a CBC report for year 1 but only as from year 2.
• Economic perspective: the new MNE already existed from an economic standpoint before the demerger. Therefore, it should be required to file the CBC report for year 1 if the total consolidated revenue from its sub-group of entities in year 0 is equal to or greater than EUR750 million.

The LTA decided to follow the economic perspective,  effective as from January 2021.

This means a new MNE, which meets the EUR750 million threshold criteria in year 0, would need to report under CBC regulations  as of the fiscal year of the demerger/acquisition (year 1). In practice, if the demerger/acquisition occurs in FY 2021 (year 1), and the new MNE met the EUR750 million threshold criteria in FY 2020 (year 0), the new MNE would need to:

• File notifications for FY 2021 before the end of 2021* (year 1); and
• File a CBC report for FY 2021 by the end of 2022*.

*If the ultimate parent’s accounts are aligned on calendar year.

On a side note, under point 9 of the FAQ document, the LTA has changed how the "NOTIN" code can be used in a CBC report. Until now, the entity in charge of submitting the CBC report only had to provide a tax identification number (TIN) for Luxembourg entities and could use "NOTIN" for non-Luxembourg entities. From now on, the LTA only allows the use of the “NOTIN” code in the following cases:

• When the entity is in the process of obtaining a TIN; or
• When the entity is located in a jurisdiction that does not provide a TIN.

We hope you find this information useful. If you have any questions, please get in touch.

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