LUXEMBOURG Law and Practice Contributed by: Michiel Boeren, Jeronimo Charvarria, Maxime Grosjean and Gauthier Mary, Tiberghien
9. Dispute Prevention 9.1 Advance Pricing Agreements
co-ordinated tax audits involving revenue authorities from two or more EU member states.
Luxembourg has an advance pricing agreement (APA) programme, which is set out in the general tax law. The programme offers taxpayers advance certainty on transfer pricing matters, helping them to avoid poten - tial disputes with the tax authorities. Taxpayers can apply for an APA through the advance The general tax law provides for a procedure that allows taxpayers to request a binding advance tax clearance from the tax authorities on the application of Luxembourg tax law to transactions that they are con - sidering but have not yet implemented. The request is subject to an administrative fee of between EUR3,000 and EUR10,000 depending on the complexity of the case. tax clearance procedure. 9.2 Other Mechanisms This clearance is valid for a maximum period of five years, but it may be withdrawn under certain circum - stances (eg, a change in applicable laws or in the tax - payer’s facts and circumstances). Clearances issued by the Luxembourg tax authorities are subject to exchange if the conditions of the law implementing DAC3 are met.
8. Mutual Agreement Procedures and Arbitration 8.1 Availability and Legal Basis The Luxembourg framework for the mutual agreement procedure (MAP) mainly comprises the Luxembourg law that implements EU Directive 2017/1852 among EU member states, as well as the MAP procedure set out in Luxembourg’s relevant double taxation treaties. 8.2 Application Deadlines For MAPs based on domestic law, the deadline is three years from the date of the initial notification of the measure that caused or will cause the dispute. For MAPs based on a tax treaty, the deadline varies depending on the treaty. It is often two or three years from the first notification of the measure that led to the Luxembourg has also opted in to the arbitration clause under the MLI, and mandatory binding arbitration is included in some of its tax treaties. Where included, this clause obliges the relevant authorities to reach a binding decision through an independent arbiter when MAP negotiations fail. The EU Arbitration Convention provides for an arbitra - tion resolution mechanism. If the relevant competent authorities fail to reach an agreement to eliminate double taxation, they must establish an independent advisory commission to deliver an opinion on how to eliminate the double taxation in question. This opinion is binding on the competent authorities. taxation being in breach of the tax treaty. 8.3 Mandatory Binding Arbitration
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