Luxembourg: Proposal to codify transfer pricing practice, advance rulings

Luxembourg: Proposal to codify transfer pricing

The Luxembourg Ministry of Finance today released a position paper concerning tax transparency and advance rulings.

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The position paper states that, among other items, under an enhanced framework for tax rulings with regard to the application of transfer prices:

  • The income tax law of Luxembourg would be amended to provide explicitly that the profits of related-party enterprises (i.e., those that are linked by conditions that differ from those between independent enterprises) would be determined under an arm’s length standard and then taxed accordingly, in line with OECD principles.
  • A specific provision would be added to the tax law regarding the documentation on transfer prices.
  • The tax administration would provide an annual report (beginning with 2015) of all tax rulings issued for the year.

According to today’s position paper [PDF 79 KB], these legislative changes would codify into law what is currently an administrative practice of the Luxembourg tax office.

The draft law would further provide that any request for a ruling regarding corporate tax matters, filed with the tax office, would have to be submitted to a supervisory commission (commission des decisions anticipées)—a newly established body, authorized to issue a binding opinion on which the tax office’s advance ruling would be based.

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