LUXEMBOURG Law and Practice Contributed by: Oliver R. Hoor and Fanny Addouda, ATOZ Tax Advisers
ment activities) are regularly relevant in practice as well. 3.4 Ranges and Statistical Measures The Luxembourg legislation does not require the use of ranges or statistical measures. However, since the LTA follow the OECD Transfer Pricing Guidelines, ref - erence has to be made to these in this respect. 3.5 Comparability Adjustments Based on paragraph 4 of Article 56bis of the LITL, transactions are sufficiently comparable when there are no material differences between the transactions being compared that could have a significant meth - odological influence on the determination of the price, or when reasonably reliable adjustments can be made to eliminate the impact on price determination. Thus, comparability adjustments have to be reliable and reasonable, and may be performed (“in accordance with internationally recognised standards”, as Circular 56/1 – 56bis/1 states) if they are necessary to improve the reliability and quality of the comparability analysis. Luxembourg tax legislation does not include any spe - cific rules relating to the transfer pricing of intangibles. Thus, reference has to be made to Chapter VI of the OECD Transfer Pricing Guidelines in this respect. How - ever, Circular 50ter/1 of 28 June 2019 dealing with the Luxembourg intellectual property (IP) regime (ie, 80% corporate income tax and municipal tax exemption of the net qualifying income and capital gains derived from eligible IP assets and 100% exemption of quali - fying IP assets for net wealth tax purposes) specifies that the arm’s length principle defined in Article 56 and Article 56bis of the LITL applies in case of application of the IP regime. 4.2 Hard-to-Value Intangibles Luxembourg tax legislation does not include any specific rules relating to hard-to-value intangibles (HTVI), so the OECD Transfer Pricing Guidelines have to be followed in this respect. Based on the Luxem - bourg questionnaire on the Implementation of the HTVI Approach included in the Luxembourg country 4. Intangibles 4.1 Notable Rules
profile released by the OECD, even though the HTVI approach defined in Chapter VI is to be considered as not implemented in domestic legislation, the gen - eral provisions of Chapters I–III can be used for audit purposes with regard to transactions involving intan - gibles. Attention should be paid to the fact that arrangements involving the transfer of HTVI between associated enterprises belong to the transfer pricing arrange - ments, which may have to be reported under the Lux - embourg Law of 25 March 2020 implementing Council Directive (EU) 2018/822 (DAC6), as amended, regard - ing reportable cross-border arrangements. HTVI are defined in Part 2 of the Annex to the Law of 25 March 2020, which deals with the “hallmarks” (ie, character - istics or features of a cross-border arrangement that indicate a potential risk of tax avoidance) as follows: “Intangibles or rights in intangibles for which, at the time of their transfer between associated enterprises, (a) no reliable comparables exist and (b) at the time the transaction was entered into, the projections of future cash flows or income expected to be derived from the transferred intangible, or the assumptions used in valuing the intangible, are highly uncertain, making it difficult to predict the level of ultimate success of the Luxembourg tax legislation does not include any spe - cific rules relating to cost sharing or cost contribution arrangements. Therefore, the guidance included in the OECD Transfer Pricing Guidelines in this respect (ie, Chapter VIII) has to be followed. 5. Adjustments 5.1 Upward Transfer Pricing Adjustments While both upward and downward adjustments may be made in application of the arm’s length principle, according to the LGTL, amended tax returns may only be filed (or may even have to be filed) by taxpayers under certain limited conditions and circumstances. As long as no tax assessment has been released, the taxpayer has the possibility to file an amended tax intangible at the time of the transfer”. 4.3 Cost Sharing/Cost Contribution Arrangements
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