Luxembourg Tax Alert 2017-12 | KPMG | LU

Luxembourg Tax Alert 2017-12

Luxembourg Tax Alert 2017-12

The OECD guidelines are a valuable source for Luxembourg taxpayers, since the Luxembourg transfer pricing rules are inspired by the OECD guidelines

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The updated version of the “OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations” was released on 10 July 2017 (available here). They provide guidance on the application of the “arm’s length principle”—that is, the international consensus on the valuation, for income tax purposes, of cross-border transactions between associated enterprises. The OECD guidelines provide a valuable source for Luxembourg taxpayers, since the Luxembourg transfer pricing rules are largely inspired by these OECD guidelines.

Changes to the OECD Guidelines

The 2017 edition of the transfer pricing guidelines mainly
reflects a consolidation of the changes resulting from the OECD/G20 base
erosion and profit shifting (BEPS) project, and incorporates the following
revisions of the 2010 edition into a single publication:

  • Substantial revisions were introduced by the 2015 reports on BEPS Actions 8-10 (Aligning transfer pricing outcomes with value creation). These amendments were incorporated into the guidelines in May 2016. However, the 2017 edition does not include the implementation guidance for tax administrations on hard-to-value intangibles (PDF | 144KB), the guidance on attribution of profits to permanent establishments (PDF | 150KB) nor the guidance on profit splits (PDF | 1.63MB) which are still under discussion.
  • Chapter V on “Documentation” was substantially revised by taking into account the 2015 reports on BEPS Action 13 (Transfer pricing documentation and country-by-country reporting).
  • Chapter IX was revised to conform the guidance on business restructurings to the revisions introduced by the 2015 reports on BEPS Actions 8-10 and 13.
  • The revised guidance on safe harbours for taxpayers in Chapter IV provides circumstances in which taxpayers may elect to follow a simple set of prescribed TP rules or may be exempted from the application of the general TP rules.

Practical impact

There is no new substantive content in the published version of the guidelines beyond what was already announced in the OECD BEPS Actions 8-10 and Action 13 final reports.

The formal publication of the guidelines should, however, enhance the legal standing of the OECD guidelines in Luxembourg, since the Luxembourg transfer pricing rules are largely inspired by and based on these OECD guidelines (see Article 56 and 56bis of the Luxembourg Income Tax Law). Therefore, Chapter I on “The Arm´s Length Principle” and Chapter III on the “Comparability Analysis” are of particular importance for multinational enterprises operating in Luxembourg.

For queries please contact:

Sophie Boulanger
Associate Partner
E-mail: sophie.boulanger@kpmg.lu
Phone: +352 22 51 51 5423

Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.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 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 on such information without appropriate professional advice after a thorough examination of the particular situation.

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