By Danny Beeton, Of Counsel, Arendt & Medernach, Luxembourg and London
Luxembourg’s Budget Bill published on 14 October provides that all advance pricing agreements and other advance tax confirmations (so-called tax rulings) granted by the Luxembourg tax authorities before 1 January 2015 will cease to be binding on the Luxembourg tax authorities at the end of 2019, or earlier in 2019 (i.e. with retrospective effect) if the taxpayer’s book/tax year-end is before 31 December.
This is not unexpected in that such advance tax confirmations have been limited to a five-year term since a new procedure was introduced at the end of 2014. In practice, the benefits of the older advance tax confirmations will also usually be limited by now anyway, because they only gave protection as long as they complied with national, EU and international law, which has generally changed significantly in the intervening period.
Taxpayers who still wish to benefit from assurance about their tax treatment can request an advance tax confirmation under the new procedure. It is notable that while generally, this can only be used for transactions that have not yet been carried out, so that a new transfer pricing arrangement and agreement may be required, the bill appears to permit new advance tax confirmations for these older, existing transactions. However, it may be that older structures and transactions are no longer tax-effective given the way in which they would be treated in a new advance tax confirmation, as a result of the developments in Luxembourg and international tax law since the initial granting of the advance tax confirmation.
Any request for a new advance tax confirmation should be submitted to the head of the taxation office, after which the applicant will be informed of the appropriate fee that has been determined and may be invited to present the application orally to the Commission of advance tax confirmation once the fee has been paid. The Commission, which will also have received the written application, will then pass its advice to the head of the taxation office who would issue the advance tax confirmation.
–Danny Beeton is Of Counsel at Arendt & Medernach, Luxembourg and London
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