LUXEMBOURG Law and Practice Contributed by: Oliver R Hoor and Fanny Addouda, ATOZ Tax Advisers
5. Adjustments 5.1 Upward Transfer Pricing Adjustments While both upward and downward adjustments may be made in application of the arm’s length principle, according to the LGTL, amended tax returns may only be filed (or may even have to be filed) by taxpayers under certain limited condi - tions and circumstances. • As long as no tax assessment has been released, the taxpayer has the possibility to file an amended tax return, reflecting the adjustment, no matter whether the adjust - ment is positive for the taxpayer or not. Based on paragraph 85 of the LGTL, the tax authorities 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 tax - payer’s request, the tax office may amend the tax assessment, but only to the extent that the deadline for challenging this tax assess - ment (ie, three months by means of a so- called réclamation ) has not elapsed. • Once the three month-deadline for challeng - ing 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 assessment (which did not take this adjustment into consideration) was wrong. • Lastly, every time a tax assessment has been issued based on a wrong tax return and the mistake 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.
in the Luxembourg country profile released by the OECD, even though the HTVI approach defined in Chapter VI is to be considered as not implemented in domestic legislation, the gen - eral provisions of Chapters I-III can be used for audit purposes with regard to transactions on intangibles. Attention should be paid to the fact that arrange - ments involving the transfer of HTVI between associated enterprises belong to the trans - fer pricing arrangements which may have to be reported under the Luxembourg Law of 25 March 2020 implementing Council Directive (EU) 2018/822 (DAC6), as amended, regarding reportable cross-border arrangements. HTVI are defined in Part 2 of the Annex to the Law of 25 March 2020, which deals with the “hallmarks” (ie, characteristics or features of a cross-border arrangement that indicate a potential risk of tax avoidance) as follows: “Intangibles or rights in intangibles for which, at the time of their transfer between associated enterprises, (a) no reliable comparables exist and (b) at the time the trans- action was entered into, the projections of future cash flows or income expected to be derived from the transferred intangible, or the assump- tions used in valuing the intangible, are highly uncertain, making it difficult to predict the level of ultimate success of the intangible at the time of the transfer.” 4.3 Cost Sharing/Cost Contribution Arrangements Luxembourg tax legislation does not include any specific rules relating to cost sharing or cost contribution arrangements. Therefore, the guidance included in the OECD Transfer Pricing Guidelines in this respect (ie, Chapter VIII) has to be followed.
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