LUXEMBOURG Law and Practice Contributed by: Oliver R Hoor and Fanny Addouda, ATOZ Tax Advisers
5.2 Secondary Transfer Pricing Adjustments
the grounds of the double tax treaty (Luxem - bourg has an extensive tax treaty network and almost all tax treaties include a provision on exchange of information in line with Article 26 of the OECD Model Tax Convention) concluded by Luxembourg with the jurisdiction of the for - eign requesting authority or based on Council Directive 2011/16/EU of 15 February 2011 on administrative co-operation in the field of taxa - tion (DAC) if the exchange is requested by an authority of another EU member state. The pro - cedure for exchanging information on request in these cases, as well as under the Law of 26 May 2014 approving the Convention on Mutu - al Administrative Assistance in Tax Matters, is governed by the Law of 25 November 2014. In order to avoid so-called “fishing expeditions” , only “foreseeably relevant” information can be exchanged. In 2023, the Luxembourg authorities received 911 requests from other jurisdictions, compared to 1189 requests in 2021 and 1038 requests in 2022. Thus, the number of requests has been decreasing since 2021, which is most probably due to the fact that foreign authorities already receive an ever-increasing amount of information automatically. Automatic Exchange of Information The scope of information to be exchanged on a mandatory and automatic basis has been increasing consistently over the past few years through several amendments of the DAC, each of them having been implemented into Luxem - bourg law. The most important scope extensions for trans - fer pricing purposes are as follows. • Advance pricing agreements (APAs) – Council Directive (EU) 2015/2376 (DAC3), implement - ed by the Law of 23 July 2016, which extend -
Luxembourg’s domestic tax law does not include explicit provisions regarding secondary transfer pricing adjustments, such as deemed dividends and constructive loans. However, such adjust - ments may arise indirectly through other tax provisions, particularly in the context of hidden dividend distributions, hidden capital contribu - tions and interest-free loans. For more informa - tion, please refer to sections 1.1 Statutes and Regulations and 14.2 Significant Court Rulings . In a cross-border context, tax treaties conclud - ed by Luxembourg generally include a provision drafted along the lines of Article 9 of the OECD Model Tax Convention. This allows for primary adjustments in the case of non-arm’s length conditions and requires secondary adjustments to consider arm’s length conditions. Should the tax administrations of the contracting states not be able to agree on an arm’s length pricing, taxpayers may set in motion a mutual agree - ment procedure (MAP). Please refer to sections 7. Advance Pricing Agreements (APAs) and 16. Transparency and Confidentiality for more information.
6. Cross-Border Information Sharing 6.1 Sharing Taxpayer Information
There is a multitude of legal instruments for exchanging information on Luxembourg taxpay - ers with foreign tax authorities. The exchange can take place upon request, automatically or spontaneously. Exchange of Information Upon Request As far as exchange of information upon request is concerned, it can mainly take place either on
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