LUXEMBOURG Law and Practice Contributed by: Oliver R. Hoor and Fanny Addouda, ATOZ Tax Advisers
7.4 Limits on Taxpayers/Transactions Eligible for an APA An APA can be requested by any type of taxpayer and
• the situation or operations performed differ from those described in the APA request; or • it appears that the APA is not, or is no longer, in line with Luxembourg, EU or international tax law. 7.8 Retroactive Effect for APAs Given that unilateral APA requests have to be filed before the transaction they relate to takes place, in principle, there is no possible retroactive effect. 8. Penalties and Documentation 8.1 Transfer Pricing Penalties and Defences Luxembourg legislation does not provide for penal - ties that are transfer-pricing-specific or linked to the preparation and maintenance of transfer pricing docu - mentation. If a transaction has been priced in such a way that it does not reflect the arm’s length principle, the tax authorities will perform an adjustment based on Article 56 of the LITL. However, penalties might apply in the context of man - datory reporting requirements, which include transfer pricing data, such as under the CbC reporting require - ments, where the LTA may levy, on a discretionary basis, a fine of up to EUR250,000 in cases of non- filing, late filing or incomplete or incorrect filing of the CbC report – as well as in cases of non-compliance with the filing rules. The same level of penalties also applies in case of breach of the reporting requirements under the law implementing DAC6, which also covers transactions that are transfer pricing-related. As far as transfer pricing documentation is concerned, based on paragraph 171 of the LGTL, it only has to be provided to the tax authorities upon request, and there is no general obligation to prepare such docu - mentation. However, given that taxpayers have to be in the position to justify the positions they take in their tax returns, including when they enter into transac - tions with related parties, they have to be in a position to present, upon request, documentation illustrating how the arm’s length price of these transactions was determined. Therefore, from a practical point of view, even if it is not required by the law, taxpayers should prepare their transfer pricing documentation upfront.
can deal with any type of transaction. 7.5 APA Application Deadlines
Unilateral APA requests have to be filed before the transaction takes place. As far as bilateral and mul - tilateral APAs are concerned, they generally have to be requested within three years starting from the first notification of the action resulting in: • taxation not in accordance with the provisions of • double taxation, depending on whether the request is made during a MAP initiated based on a double tax treaty, the law implementing the EU Directive on tax dispute resolution mechanisms in the EU or the EU Arbitration Convention. 7.6 APA User Fees In the same way as any other advance tax clearance dealing with company taxation issues, unilateral APAs are subject to a fee that is determined by the LTA upon receipt of the request. The fee ranges between EUR3,000 and EUR10,000, depending on the com - plexity and the amount of work required. In practice, in transfer pricing matters, the fee very often reaches EUR10,000. The fee is payable within one month. Based on the legislation in force, no fee applies to bilateral or multilateral APAs. However, should draft law No 8186 (introducing a new procedure for request - ing an advanced bilateral or multilateral agreement on transfer pricing pursuant to the double tax treaties) become law in its current form, a fee ranging between EUR10,000 and EUR20,000 (depending on the level of complexity and the amount of work required) would apply. 7.7 Duration of APA Cover the covered tax agreement; • the question in dispute; or The APA is valid for a maximum five tax years and has a binding effect on the tax authorities, except when: • the situation or operations described are not accu - rate;
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