AGEFI Luxembourg - juin 2025

Juin 2025 23 AGEFI Luxembourg Conseil / RSE T his article focuses on the accounting and financial reporting recom- mendations providedby the LuxembourgAccountingStandards Board’s (CommisiondesNormes Comptables - CNC)Q&Adocument CNC25/035, in relation to theOECD’s Pillar Two framework. (1) Keytopicsincludethedistinctac- counting treatment between fis- cal years before the transition yearandyearsstartingfromthe transition period, the recogni- tion of deferred tax assets, dis- closurerecommendationsand practical implications for Lux- embourg businesses in terms offinancialreporting.Notably, this article will not cover specific methodsforcalculatingtaxesundertheLuxembourg PillarTwoLaw,astheCNChasclarifiedthatsuchcal- culationsarebeyondthescopeoftheissuedguidance. Introduction On March 24, 2025, the Luxembourg CNC released Q&Adocument CNC25/035, whichprovides essen- tial guidance for companies preparing their annual andconsolidatedfinancial statementsunderLuxem- bourg Generally Accepted Accounting Principles (LuxGAAPorLuxGAAP-JV) in light of theOECD’s PillarTwoframework.Thisguidanceissignificantfor multinational enterprises (MNEs) and large national groups, as it clarifies the accounting and financial re- portingimplicationsoftheglobalminimumtaxrules, bothbefore and after the transitionperiod. The CNC’s Q&A25/035 builds upon previous guid- ance issued in 2024 (Q&A 24/031 and Q&A 24/032), whichfocusedontheimpactofPillarTwoonfinancial statements for the period before the transition year. The transition year is defined as the first fiscal year duringwhichanMNEgrouporlargenationalgroup fallswithin the scope of theGloBERules for a partic- ular jurisdiction. UnderstandingPillar Two Pillar Two, as transposed to Luxembourg law, aims to establish a global minimum tax rate for MNEs or large-scaledomesticgroups, ensuring that theypaya fairshareoftaxesinthejurisdiction(s)wheretheyop- erate.Therulesapplytogroupswithconsolidatedan- nualrevenuesofatleastEUR750millionintwoofthe preceding four fiscal years. KeyAspects of theCNC’s Pillar TwoQ&A TheaccountingofPillarTwotaxescanbedifferentbe- fore and after the start of the transitionperiod. - Year before the Transition Year : Companies do not record any Pillar Two-related current or de- ferred tax liabilities in their financial statements as they arenot yet subject toPillar Two.However, they could evaluate and disclose the potential impact of Pillar Two on their financial position. TheCNCem- phasizes the importance of presenting a true and fair view of financial statements, allowing compa- nies to disclose potential exposure while strongly recommending reporting if the impact of Pillar Two rules is certain. - Transition Year and later years : Once Pillar Two taxes become applicable, companiesmust reflect the actual impact of thePillarTwo rules in theirfinancial statements. The level of detail required in thedisclo- sures will depend on the significance of the impact of Pillar Two as determined bymanagement. In the context of the application of the Pillar Two law, there are two distinct ways for Luxembourg companies or groups to reflect the impact of Pillar 2 in the accounts. In the first case, if a company or group is subject to the Pillar TwoLawbut finds that the taxes resulting from this legislation are either insignificant or non- existent, it is, in principle, not necessary to disclose any related information in the notes to its annual or consolidated financial statements. However, should the administrative or management bodies of the company deem the Pillar Two information relevant for the reader and users of the financial statements, additional disclosures must be made. This aligns with the principles of providing a true and fair view as mandated by LUX GAAP. Conversely, in the second scenario, if the taxes aris- ing from the “Pillar Two” law are deemed signifi- cant, the company or group should provide supplementary information in the notes to the fi- nancial statements. The nature and extent of this additional information are left to the discretion of themanagement, whomust ensure that the disclo- sures fulfill the objective of presenting a true and fair view of the financial position of the company or group. For instance, the CNC suggests that this could include a separate presentationof the current income tax expense attributable to the “Pillar Two” legislation, thereby enhancing trans- parency and compliance with the ac- counting standards. Please refer to our comments belowwith respect to “Ac- counting for Pillar Two Taxes”. 1. Disclosure Recommendations (for periods before the transition year) – The CNC outlines specific qualita- tive and quantitative informa- tion that must be disclosed in the financial state- ments: - Qualitative Informa- tion :Companiesshould describehowtheymight be impacted by Pillar Two, including themain countries where they could be exposed to taxes. - Quantitative Information : This includes details such as the proportionof prof- its subject to Pillar Two taxes, the effective tax rate on these profits, and an analysis of howPillar Two would affect the overall tax burden of the Luxem- bourg company or group. 2. DeferredTaxAssets (DTAs) – The guidance also addresses the treatment of deferred tax assets: Determining the calculation of DTAs related to tax attributes and temporary differences is crucial for Luxembourg companies, especially those within MNE groups or large national groups. This is par- ticularly important regarding tax attributes earned before the transitionyear tobe able touse themsub- sequentlyunder Pillar Two rules andhowdeferred taxmovementsmay impact Pillar Two results once in transition and future years. In this regard, the CNC advises that DTAs should bedisclosedbasedon thegross value of these tax at- tributes or temporary differences, utilizing the ap- plicable income tax rates in Luxembourg. For instance, as of the end of the 2024 financial year, companies in Luxembourg City would apply a tax rate of 23.87% for their deferred tax assets, which corresponds to the income tax rate for the 2025fiscal year. It is important tonote that this ratemaychange over time or if the company redomiciles in another municipality, necessitating adjustments to the de- ferred tax asset amounts as tax rates change. Companies candisclose theirDTAs in the appendix of their annual and/or consolidated financial state- ments, allowing for better monitoring and trans- parency. In that case companies are not required to perform a recoverability analysis for these tax at- tributes. Recoverability analysis refers to the assess- ment of whether it is probable that the DTAwill be consumed in the future and involves evaluating the likelihood of generating sufficient taxable income to utilize the DTA before it expires. If a Luxembourg group chooses to recognizeDTAs directly in the financial statements, a recoverability analysismust be performed, ensuring that only as- sets with a high likelihood of recovery are recog- nized. It should be noted that the CNC is clear in respect that recognition of DTAs directly in the fi- nancial statements is only acceptable in the case of consolidated financial statements. 3.Accounting for Pillar TwoTaxes – TheCNC rec- ommends using the “Other Taxes” account (688) in the Standard Chart of Accounts to recognize Pillar Two-related tax charges. Specific subdivisions can be created for different tax categories, such as: - 6881: Qualified Domestic Minimum Top-up Tax (QDMTT) - 6882: Income Inclusion Rule (IIR) - 6883: Undertaxed Profits Rule (UTPR) For tax liabilities, the CNC suggests using the “Other Debts” account (46128) with subdivisions for each tax category. Practical Implications for Luxembourg Businesses Luxembourg companies must review and poten- tially revise their accounting policies to align with the latest CNC’s guidance. This includes ensuring that Pillar Two tax liabilities are accurately recorded and that disclosures are made according to the ap- plicable guidance for the relevant period (pre-tran- sition vs. transition and later years). Next Steps for Businesses 1. ImpactAssessment : Companies should conduct a detailed assessment to determine their exposure to Pillar Two, calculate potential top-up tax liabili- ties, and identifynecessary adjustments tofinancial reporting. 2. Compliance with Disclosure Requirements : Businesses must ensure that their annual accounts reflect the necessaryPillar Twodisclosures, includ- ing for pre-transition years. 3. Expert Support : Given the complexity of Pillar Two reporting, companies should engage with ex- perienced tax and accounting professionals to re- view their financial statement presentation and comply with the recommendations provided by the CNC guidance. Conclusion TheCNC’sQ&A25/035provides essential guidance for Luxembourg companies on how to accurately incorporate the effects of this new set of rules into their financial reports. By distinguishing between the reporting requirements for pre-transition years and those for transitionand subsequent years, com- panies can be better prepared for compliance and ensure transparency in their financial statements. ChristianSCHLESSER, EYLuxembourgPartner,TaxLeader EduardoISIDRO, EYLuxembourgSeniorManager, InternationalTaxandTransactionServices 1 )https://lc.cx/CUKlZQ Understanding the Impact of Pillar Two on Financial Reporting: Key Takeaways fromCNC Q&A25/035 L a biodiversité s’impose désormais comme un enjeu stratégique pour la finance inclusive. L’agriculture est l’undes sec- teurs présentant le plus grandpotentiel de projets susceptibles d’avoir un impact sur la biodiversité. Les institutions financières peu- vent tirer parti de leur expertise et deleurpositionsurlemarchépour développer des évaluations des risques et des produits personna- lisés, aidant ainsi efficacement leursclients,toutenminimisantles risquesdepertedebiodiversité.En protégeant les écosystèmes natu- rels,lesinstitutionsfinancièrespro- tègentaussilespopulationsvulné- rables qu’elles accompagnent au quotidien. Pourquoi la biodiversité est vitale pour les populations vulnérables « Enréalité,labiodiversitéestpartout: elle régule notre vie et notre santé », affirme Nausica Fiorelli (ADA). L’eau que nous buvons, la nourri- turequenousconsommons,lasta- bilité des sols agricoles… tout dépend de la santé des écosys- tèmes. Or, les populations vulné- rables – notamment rurales – sont celles qui dépendent leplus direc- tement de cette biodiversité. Prenons l’exempledes forêts : elles jouentunrôlecrucialdanslarégu- lation de l’eau. Leur disparition accroît les risques d’inondations, qui peuvent ruiner les récoltes et détruire des habitations. En ce sens, inclure la biodiversité dans les stratégies de finance inclusive, c’est protéger les moyens de sub- sistance demillions de personnes. Mesurer l’impact sur la nature : undéfi partagé Mais comment mesurer concrète- ment les effets des activités finan- cières sur la biodiversité ? Selon Chiara Pescatori (LMDF) il s’agit d’un sujet à la fois complexe et encoreémergentpourlesinvestis- seurs à impact social, qui peinent à s’orienter parmi lamultitude de donnéesetlacomplexitédesoutils disponibles. La coopération étant essentielle,ADAet LMDF travail- lentensemblepourrelevercedéfi. LMDF a mis en place une méthode interne innovante . Elle consiste à évaluer la part de por- tefeuilleagricoledanschaquesuc- cursale d’institution financière, et à croiser ces données avec les zones de biodiversité sensi- bles (Key Biodiversity Areas). Si une succursale consacre plus de 40 % de son portefeuille à l’agri- culture, elle est considérée avoir un risque d’impact négatif sur la biodiversité. En effet, les activités financéespar l’IFpeuvent affecter directement ou indirectement des zones sensibles du point de vue de la biodiversité. Une fois les zones à risque identifiées, une visite sur le terrain, effectuée par les chargés d’investissement de ADAlorsdeladuediligence,vise à vérifier si des politiques de pro- tection sont mises en place. Cecroisementdedonnéesquanti- tatives et qualitatives permet d’es- timer le risque de dommages à la biodiversité . Ces processus repo- sentsurdespartenariatsetdescol- laborations.Lesgestionnairesd’ac- tifs, les institutions financières, les prestatairesd’assistancetechnique et les experts tels que les universi- tésetlescentresderessourcesdoi- vent travailler ensemble pour développer et partager leurs connaissances. Transformer le risque en opportunité : l’exemple rwandais Au-delà de la gestion des risques, la biodiversité peut devenir un levier d’investissement à impact. Les investisseurs à la recherche de projets durables s’intéressent de plusenplusauxinstitutionsfinan- cièresprêtesàintégrerlaprotection de la nature et la mitigation des risques pour la biodiversité dans leur stratégie. Le projet mené au Rwanda par ADA et Inkunga Finance en est une illustration concrète. Depuis 2022, Inkunga propose des prêts pour financer l’agroforesterie et la gestiondurabledesforêts.Résultat : plus de 200 bénéficiaires soute- nus, un partenariat renforcé en 2024 avec le centre de recherche CIFOR-ICRAF (International Centre for Research in Agroforestry), et l’introduction d’espèces locales pour restaurer la biodiversité. « Pour nous, ce projet est plus qu’un simplefinancement.Ilnousaideàpro- téger nos terres tout en assurant l’ave- nir de nos enfants », témoigne Jeanne, agricultrice et bénéficiaire d’un prêt agroforestier dans la régiondeKarongi. Unsystèmedesuiviestégalement en cours de développement afin demesurer les effets duprojet sur des indicateurs concrets, tels que la fertilité des sols. LireplussurleportailFinDev :Biodiversitéet inclusion financière : quels enjeux ?, https://lc.cx/uaV5ez Nausica FIORELLI, Chargée d’investissement ADA La biodiversité, enjeu stratégique pour la finance inclusive ©Freepik