LUXEMBOURG Law and Practice Contributed by: Oliver R. Hoor and Fanny Addouda, ATOZ Tax Advisers
16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes According to the Grand-Ducal Regulation of 23 December 2014 (related to paragraph 29a of the LGTL), advance tax agreements, including those covering transfer pricing aspects – ie, unilateral APAs – are published in a summarised and anonymised form in the annual report of the direct tax authori - ties. However, in practice, the information published only includes the number of decisions taken on APA requests and whether each decision was positive or negative. Luxembourg taxpayers usually do not rely on the APA procedure but rather on the preparation of robust transfer pricing documentation supporting the positions they take in their tax returns. The very low number of APAs (a single APA in 2023 based on the 2023 annual report of the direct tax authorities) illustrates this quite well. As far as bilateral MAPs are concerned, the annual report of the direct tax authorities also indicates the number of MAPs launched and closed during the year, including those related to transfer pricing. However, no information is included on the content, outcome, etc. Lastly, in line with its commitment under Action 14 of the BEPS Action Plan (“Making Dispute Resolution Mechanisms More Effective”), Luxembourg provides data and statistics to the OECD on its MAP procedure on a regular basis, including on bilateral APAs. This information is then analysed and published in the form of a peer review report by the OECD. 16.2 Use of “Secret Comparables” Luxembourg does not use “secret comparables” for transfer pricing assessment purposes.
as notional interest. Hence, the Administrative Court re-established long-standing principles with respect to the classification of financial instruments as debt or equity (ie, economic approach, substance over form). 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions The Luxembourg legislation does not include any restrictions on payments relating to uncontrolled transactions. There are only restrictions on the tax deduction of payments, which, in certain cases, like in the case of the interest limitation rules of the EU Anti-Tax Avoidance Directive (ATAD), also apply to payments to third parties. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions Luxembourg legislation does not preclude the possi - bility of making payments relating to controlled trans - actions. However, certain limitations exist on the pos - sibility of deducting such payments from a tax point of view. This is the case, for example, for interest and royalty payments made to entities located in a juris - diction considered as noncooperative, based on a list released and updated twice a year by the EU Coun - cil. Restrictions may also apply when the Anti-Hybrid Rules of the ATAD, as implemented into Luxembourg law, apply. Lastly, restrictions will apply to the part of the remuneration that exceeds the arm’s length price, or when a payment is requalified into a hidden distri - bution. In such case, withholding tax might also apply on the payment. 15.3 Effects of Other Countries’ Legal Restrictions In Luxembourg, there are no specific rules regarding the effects of other countries’ legal restrictions.
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