Luxembourg has released new transfer pricing guidance.
It clarifies the transfer pricing rules for companies performing intra-group financing transfers. Luxembourg's guidance follows recent legislative changes to address BEPS Actions 8 to10 recommendations and adapts Luxembourg's legal framework to account for recent international tax developments.
Note that the new guidance, which was published as a new Transfer Pricing Circular, does not change the scope of the previous guidance, and definitions of "intra-group financing transactions" and "associated enterprises" remain the same.
Previously, Luxembourg proposed rules to transpose elements of Action Items 8 to10 of the OECD BEPS project into Luxembourg law. These new rules, which were approved on December 22, 2016 and, together with the new circular, are intended to provide further guidance for applying the arm's-length principle starting from 2017 onwards.
New transfer pricing guidance
The new guidance highlights the importance of comparability analyses in the application of the arm's-length principle and strongly emphasizes the analysis of the risks assumed by the companies performing the intra-group financing transaction under review. The guidance provides that, in order to be able to control the risks, a company must comply with certain substantive requirements (e.g., the company should have qualified employees to control risk associated with the transactions). The guidance also provides for a simplification measure that companies may elect to use in certain circumstances.
The new guidance notes that taxpayers can still obtain an advanced pricing agreement, if the conditions outlined in the Circular are respected. The guidance further states that any advanced pricing agreement issued before the new rules were enacted are not binding on the tax authorities from January 1, 2017, for the fiscal years following 2016.
For more information, contact your KPMG adviser.
Information is current to January 24, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500