As mentioned in our previous newsletter (see our newsletter 2014-29 of 22 December 2014), the advance tax agreement (“ATA”) procedure has been modernized and explicitly formalized into Luxembourg domestic law, following thereby the current global trend towards increased transparency.
A grand-ducal decree, giving more details in this respect, was published on 29 December. With this Decree, the Luxembourg Government is following up on its promise to provide an enhanced ATA framework, making the procedure clearer and more transparent. It also brings some important changes to the way the ATA procedure will be carried out in practice, summarized below.
Overall, the new rules - which are aligned to some practices already in place in other EU countries - are a positive step forward for the Luxembourg ATA practice.
While the ATA procedure was thus so far only applicable for corporate taxpayers (from all tax offices), the Decree now also provides for requests by individual taxpayers.
However, the scope of any request remains limited to direct taxes (i.e. not to indirect taxes such as VAT). It seems that the new rules will also apply to transfer pricing requests (APA’s).
Form of the request
The Decree states that the ATA request must be made in writing and must, at the very least, contain the following information:
This list is in line with the current ATA practice, except that – from now on - any new requests cannot be filed retrospectively, meaning that the transactions for which confirmation of the applicable tax treatment is sought in the ATA should not yet have been implemented.
Period of validity
In line with the current practice, the ATAs will be valid for a 5 year period and will be binding for the tax authorities, unless:
The most important change is the creation of a new ruling commission (“commission des décisions anticipées” or “Ruling Commission”). Under the new rules, any written and motivated request for confirmation of a tax treatment filed by a corporate taxpayer will be transferred by the head of the respective competent tax office to the Ruling Commission.
ATA requests filed by individual taxpayers are out of the scope of the Ruling Commission jurisdiction.
The Ruling Commission will include members of the direct tax direction as well as of the various tax offices. It will issue binding opinions on ATA requests. The applicant may be called to a hearing at the request of the Ruling Commission, if needed.
As mentioned in our previous newsletter, corporate taxpayers who wish to obtain an ATA will have to pay an administrative fee ranging between € 3,000 and € 10,000 per request, depending on the complexity of the request and the workload of the tax authorities.
The amount due for each ATA request will be determined by the director of the direct tax authorities. Once determined, the fee will have to be paid within one month by the applicant and will not be refundable (even if the ATA request is subsequently withdrawn by the applicant or if a negative answer is given to the request).
Furthermore, ATA requests will only be dealt with by the Ruling Commission after the fee payment is made.
The annual report of the direct tax authorities will include a synthetic and anonymized summary of the ATAs issued during the year.
Entry into force
The new rules apply for all ATAs filed as from 1 January 2015.
They also apply to ATAs filed before January 2015 but that were still pending on that date, meaning that these ATAs will be automatically transferred to the Ruling Commission for processing. However, this will not trigger the retroactive liability for the fees mentioned above.
For further information, please do not hesitate to contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation.
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