LUXEMBOURG Law and Practice Contributed by: Oliver R. Hoor and Fanny Addouda, ATOZ Tax Advisers
return reflecting the adjustment, regardless of wheth - er the adjustment is positive for the taxpayer or not. Based on paragraph 85 of the LGTL, the tax authori - ties will have to assess the taxpayer based on the newly filed tax return. • Once a tax assessment has been released, based on paragraph 94 of LGTL, at the taxpayer’s request, the tax office may amend the tax assess - ment, but only to the extent that the deadline for challenging this tax assessment (ie, three months by means of a so-called réclamation ) has not elapsed. • Once the three month-deadline for challenging the tax assessment has elapsed, the tax authorities have no obligation to take the amended tax return into consideration, even if it includes a correct adjustment – ie, even in case the initial tax assess - ment (which did not take this adjustment into consideration) was wrong. • Lastly, every time a tax assessment is issued based on an inaccurate tax return where the mistake/s made in the tax return lowered the tax due by the taxpayer, there is an obligation for the taxpayer to file an amended tax return reflecting the adjustment. This obligation remains as long as the statute of limitations of five years has not elapsed. 5.2 Secondary Transfer Pricing Adjustments Luxembourg’s domestic tax law does not include explicit provisions regarding secondary transfer pric - ing adjustments, such as deemed dividends and con - structive loans. However, such adjustments may arise indirectly through other tax provisions, particularly in the context of hidden dividend distributions, hidden capital contributions and interest-free loans (IFLs). For more information, please refer to 1.1 Statutes and Regulations and 14.2 Significant Court Rulings . In a cross-border context, tax treaties concluded by Luxembourg generally include a provision drafted along the lines of Article 9 of the OECD Model Tax Convention. This allows for primary adjustments in the case of non-arm’s length conditions and requires secondary adjustments to consider arm’s length con - ditions. Should the tax administrations of the contract - ing states not be able to agree on an arm’s length pric -
ing, taxpayers may set in motion a mutual agreement procedure (MAP). Please refer to 7. Advance Pricing Agreements (APAs) and 16. Transparency and Con- fidentiality for more information. 6. Cross-Border Information Sharing 6.1 Sharing Taxpayer Information There are a multitude of legal instruments for exchang - ing information on Luxembourg taxpayers with foreign tax authorities. The exchange can take place upon As far as exchange of information upon request is concerned, it can mainly take place either on the grounds of the double tax treaty (Luxembourg has an extensive tax treaty network, and almost all tax trea - ties include a provision on exchange of information in line with Article 26 of the OECD Model Tax Conven - tion) concluded by Luxembourg with the jurisdiction of the foreign requesting authority, or based on Council Directive 2011/16/EU of 15 February 2011 on adminis - trative co-operation in the field of taxation (DAC) if the exchange is requested by an authority of another EU member state. The procedure for exchanging informa - tion on request in these cases, as well as under the Law of 26 May 2014 approving the Convention on Mutual Administrative Assistance in Tax Matters, is governed by the Law of 25 November 2014. To avoid so-called “fishing expeditions”, only “foreseeably rel - evant” information can be exchanged. In 2023, the Luxembourg authorities received 911 requests from other jurisdictions, compared to 1189 requests in 2021 and 1038 requests in 2022. Thus, the number of requests has been decreasing since 2021, which is probably due to the fact that foreign authorities are already receiving an ever-increasing amount of infor - mation automatically. Automatic Exchange of Information The scope of information to be exchanged on a mandatory and automatic basis has been increasing consistently over the past few years through several amendments to the DAC that have been implemented into Luxembourg law. request, automatically or spontaneously. Exchange of Information Upon Request
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