Transformation of the Luxembourg tax environment

DROIT LUXEMBOURGEOIS

Over the last years, the Luxembourg tax environment has undergone a comprehensive transformation following the OECD Base Erosion and Profit Shifting (""BEPS"") Project and subsequent initiatives at EU level.
With the transposition of the two Anti-Tax Avoidance Directives (ATAD and ATAD 2) and the implementation of other tax measures into Luxembourg tax law, the Grand-Duchy contributed to a level playing field in international taxation. ATAD and ATAD 2 resulted in the implementation of a number of anti-abuse provisions including:

- Interest limitation rules
- Controlled foreign company (CFC) rules
- Hybrid mismatch rules
- General Anti-abuse Rule (GAAR)
- Exit tax rules

In addition, the Luxembourg legislator changed in 2019 the definition of permanent establishments (PE) and abolished the roll-over relief applicable to conversions of debt instruments into equity.
The Luxembourg transfer pricing regime applicable to companies performing financing activities has already been changed as from 2017, anticipating post-BEPS OECD transfer pricing guidance. Furthermore, as from 2018, the Luxembourg IP tax regime has been amended in order to comply with the modified-nexus approach that has been developed as part of the BEPS Project.
While substance was always an important topic for Luxembourg companies that are frequently involved in cross-border investment and business activities, the focus on economic substance has only increased throughout and following the OECD BEPS Project. Therefore, it is crucial to equip Luxembourg companies with an appropriate level of substance.
The OECD BEPS Project also had a significant impact on the global network of bilateral tax treaties which has been amended through the Multilateral Instrument (MLI). The MLI provided contracting states with a lot of flexibility in terms of implementation options and generally resulted in the adoption of anti-abuse provisions such as the principal purposes test (PPT).
Last but not least, the Luxembourg legislator implemented the mandatory disclosure regime (MDR), transposing DAC 6 into domestic law. Under the MDR, tax intermediaries are required to report information on certain cross-border arrangements to the Luxembourg tax authorities.
This book provides a 360° view on the transformation of the Luxembourg tax environment. The practical guidance in this book will equally benefit tax advisers, practitioners and other professionals that have to deal with taxation.

Oliver R. Hoor  is a Partner in the International and Corporate Tax department of ATOZ. A tax professional since 2003, Oliver has experience in Luxembourg and international taxation with a focus on alternative Investments (private equity, real estate, sovereign wealth funds, hedge funds), mergers & acquisitions and multinational groups. Oliver advises clients on all direct tax aspects regarding deal structuring, maintenance, reorganisations and exit planning. He is Head of Transfer Pricing and the German Desk. Oliver is further a member of the tax working groups of the Association of the Luxembourg Fund Industry (ALFI) and the Luxembourg Private Equity Association (LPEA). Oliver is the author of more than 250 articles and books on Luxembourg and international taxation including Transfer Pricing and related documentation requirements, the OECD Base Erosion and Profit Shifting (BEPS) Project and the EU Anti-Tax Avoidance Directives (ATAD 1 & 2), reporting obligations of tax intermediaries (DAC 6), the OECD Model Tax Convention and Tax Treaties, EU Law and the State Aid investigations of the EU Commission. He is also a regular speaker at conferences as well as a lecturer with House of Training, Legitech and ILA.