On 24 February 2023, draft law No. 8158 transposing Directive (EU) 2021/2101 of 24 November 2021 amending Directive 2013/31/EU as regards disclosure of income tax information by certain undertakings and branches (the “Directive”) and amending: 1° the law of 10 August 1915 on commercial companies, as amended; 2° the law of 19 December 2002 on the register of commerce and companies as well as on the accounting and annual accounts of undertakings, as amended (the “Draft Law”) was submitted to the Luxembourg Parliament (Chambre des Députés).
Cornerstone to ensure the proper functioning of the internal market, the Directive aims to promote transparency of income tax information and responsible commitment of multinational companies and groups with significant turnover established in the EU.
Scope of the income tax information disclosure
The Directive requires companies to publish certain corporate tax information. Four categories of companies will be concerned by this annual publication requirement:
- Ultimate parent companies whose consolidated group turnover exceeds EUR 750 million per year over two consecutive financial years;
- Autonomous companies governed by the law of a Member State whose annual turnover exceeds EUR 750 million over two consecutive financial years;
- Medium-sized and large enterprises governed by the law of a Member State which are subsidiaries of an ultimate parent enterprise not governed by the law of a Member State whose consolidated turnover exceeds EUR 750 million per year;
- Branches opened in the EU by an enterprise which is not governed by the law of a Member State and which itself has a net turnover exceeding EUR 8,8 million in Luxembourg and of which the enterprise of which it is an offshoot belongs to a group with a consolidated net turnover in excess of EUR 750 million per annum or to an autonomous enterprise with a net turnover in excess of EUR 750 million per annum. The ultimate parent company of this company must be established outside the EU.
Penalties
The Directive sets a fine between EUR 500 and EUR 25,000 that shall be imposed on:
- Managers or directors and supervisory bodies who have not drawn up, published or made available within 12 months of the closing date of the financial year to which it relates, the declaration of information relating to corporate income tax;
- The permanent representatives of the company for the activity of the branch.
The Luxembourg approach
As regards the arrangements for transposing the Directive in Luxembourg, its scope will be restricted to:
- public limited company (société anonyme (“SA”)) and similar entities (limited partnership by shares (société en commandite par actions (“SCA”)), limited liability company (société à responsabilité limitée (“Sàrl”));
- partnerships (general partnerships (société en nom collectif (“SNC”)) and common limited partnership (société en commandite simple (“SCS”)) when their direct or indirect partners who are indefinitely liable are organized as limited liability companies or similar;
- branches opened in the Grand Duchy of Luxembourg by multinational groups or autonomous companies established outside the EU.
Thus, entities established under another legal form such as special limited partnerships (société en commandite spéciale (“SCSp”)) are outside the scope of the rules.
The Directive sets out options for derogating from the statement requirement. The exercise of these options is envisaged in Luxembourg. They are as follows:
- The possibility for companies to defer the publication of certain information for a maximum period of five years when its publication would be seriously prejudicial to the commercial position of the companies to which it relates (e.g. protection of business secrets).
- The possibility to exempt companies from the obligation to publish the corporate income tax information statement on their website, provided that the statement is made publicly available in machine-readable electronic format on the website of the commercial register, free of charge and to any third party located in the EU.
Entry into force
The Directive requires Member States to bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 22 June 2023 and will apply to financial years beginning on or after 22 June 2024. However, for companies with a calendar year accounting period, the first corporate income tax information return will be for the year 2025 and must be published before the end of 2026.
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