LUXEMBOURG Law and Practice Contributed by: Oliver R Hoor and Fanny Addouda, ATOZ Tax Advisers
6.2 Joint Audits While transfer pricing joint audits are not yet widespread in Luxembourg, the country partici - pates in EU and OECD initiatives that promote them, as follows. EU Joint Audit Initiatives • Under the EU Joint Audit Framework, Luxem - bourg can engage in joint audits with other EU member states as part of the Fiscalis 2020 and Fiscalis 2027 programmes. • The Directive on Administrative Cooperation (DAC 7) enhances tax transparency and co- operation among EU tax authorities, facilitat - ing more joint audits. OECD and BEPS Initiatives • Luxembourg adheres to the OECD BEPS Action 13, which promotes international tax co-operation and joint audits. • The OECD’s Forum on Tax Administration (FTA) encourages the use of joint audits to improve tax compliance in cross-border transfer pricing cases. In addition, Luxembourg has an extensive tax treaty network with more than 80 jurisdictions, which includes MAP provisions that allow for joint tax examinations. Luxembourg is also part of the Joint Interna - tional Taskforce on Shared Intelligence and Col - laboration (JITSIC), which enables global tax authorities to co-ordinate on high-risk tax issues, including transfer pricing.
ed the automatic exchange to tax rulings and APAs. • CbC reporting – Council Directive (EU) 2016/881 (DAC4), implemented by the Law of 23 December 2016, which extended the automatic exchange to CbC reports; and • Cross-border arrangements – DAC6, imple - mented by the Law of 25 March 2020, which introduced mandatory disclosure rules for intermediaries on certain reportable cross- border arrangements. The following cross- border transfer pricing arrangements are covered: arrangements which involve the use of unilateral safe harbour rules (Hallmark E1) and arrangements involving the transfer of Hard-to-Value Intangibles (Hallmark E2), as well as arrangements involving intragroup cross-border transfers of functions and/or risks and/or assets, if the projected annual earnings before interest and taxes (EBIT), during the three-year period after the transfer, of the transferor(s) are less than 50% of the projected annual EBIT of such transferor(s) if the transfer had not taken place. Spontaneous Exchange of Information The LTA may also exchange information spon - taneously with other jurisdictions based on the DAC (in an EU context) or based on the Conven - tion on Mutual Administrative Assistance in Tax Matters (which 147 jurisdictions have signed as of today). Information can only be exchanged if the LTA have grounds for supposing that there may be a loss of tax in the other jurisdiction. Circular 56/1 – 56bis/1 of the LTA on the tax treatment of intra-group financing activities states that companies which opted for the sim - plification measure that may apply to Luxem - bourg companies acting as mere intermediaries will be subject to spontaneous exchanges of information.
241 CHAMBERS.COM
Powered by FlippingBook