LUXEMBOURG Law and Practice Contributed by: Oliver R. Hoor and Fanny Addouda, ATOZ Tax Advisers
activities states that companies opting for the sim - plification measure that may apply to Luxembourg companies acting as mere intermediaries will already be subject to spontaneous exchanges of information, reporting under DAC6 in this specific situation would mean that the information would be exchanged twice (once under the spontaneous information exchange and once under the automatic exchange of DAC6). 11.2 Rules on Savings Arising From Operating in the Jurisdiction Luxembourg does not have any specific rules govern - ing savings that arise from operating in Luxembourg. 11.3 Unique Transfer Pricing Rules or Practices Luxembourg does not have any notable unique rules or practices applicable in the transfer pricing context. 11.4 Financial Transactions Luxembourg has issued specific local guidance on financial transactions, as outlined in Circular 56/1 – 56bis/1 of the LTA (see 1.1 Statutes and Regula- tions ). This Circular provides detailed instructions on the transfer pricing treatment of intra-group financing activities. According to the Circular, a financing entity should possess the capacity to assume risks related to its financial intermediation activities, exercise con - trol over risks (including credit risk management) and maintain sufficient equity levels to absorb potential losses. From a wider perspective, Luxembourg generally adheres to the OECD Transfer Pricing Guidelines, par - ticularly Chapter X, which emphasises the accurate delineation of financial transactions and the assess - ment of risk control functions. 12. Co-Ordination With Customs Valuation 12.1 Co-Ordination Requirements Between Transfer Pricing and Customs Valuation While there is no specific provision in Luxembourg law in respect of the arm’s length value for customs duty purposes, Article 70-3 (d) of the Union Customs Code applies the arm’s length principle in order to determine
the customs value, stating that the transaction value shall apply provided that “the buyer and seller are not related or the relationship did not influence the price”. The Law of 19 December 2008 provides a legal frame - work for the exchange of information between the different LTA – ie, the direct tax authorities ( Admin- istration des contribution Directes ), the indirect tax authorities ( Administration de l’Enregistrement, des Domaines et de la TVA ) and the customs and excise duties administration ( Administration des Douanes et Accises ) – as well as with other public authorities such as the supervisory authority of the financial sec - tor ( Commission de Surveillance du Secteur Finan- cier ). However, in practice, to date, the use of transfer pricing documentation for customs duty purposes is uncommon. 13. Controversy Process 13.1 Options and Requirements in Transfer Pricing Controversies There is no dedicated procedure applicable to transfer pricing matters, meaning that the same procedure as for any other direct tax matters applies when it comes to transfer pricing audits or to legal proceedings. In a first step, the tax authorities may consider per - forming a tax audit that can take the form of either a general information request or a more formal tax audit, involving several steps. In practice, an increas - ing number of tax audits (in the form of a general infor - mation request) are being performed, especially when it comes to intra-group financing transactions. The tax audit is performed by the local inspector in charge of the taxpayer. Besides the statute of limitations (of five years in principle), there is no timeline for performing a tax audit, and the tax authorities set the deadline for the taxpayer to provide the information requested (generally two to four weeks). The taxpayer has the obligation to provide the information requested and must answer any additional questions the tax authori - ties may ask during the audit process. In practice, the tax authorities request the transfer pricing documen - tation supporting the intra-group transactions per - formed by the taxpayer as well as the related agree -
136 CHAMBERS.COM
Powered by FlippingBook