LUXEMBOURG Law and Practice Contributed by: Oliver R Hoor and Fanny Addouda, ATOZ Tax Advisers
upon request and there is no general obligation to prepare such documentation. However, given that taxpayers have to be in the position to jus - tify the positions they take in their tax returns, including when they enter into transactions with related parties, they have to be in the position to present, upon request, documentation illustrat - ing how the arm’s length price of these transac - tions was determined. Therefore, from a practi - cal point of view, even if it is not required by the law, taxpayers should prepare their transfer pricing documentation upfront. Lastly, the general administrative penalties which apply in any other tax matters – ie, in the case of late filing of the tax returns, late payment of the tax due or in the case of fraud – might also apply. 8.2 Transfer Pricing Documentation There is a requirement to file CbC reports, based on the the Law of 23 December 2016 implement - ing Council Directive (EU) 2016/881 of 25 May 2016. This obligation applies to MNE groups with a consolidated revenue exceeding EUR750 million, whereby the entity of the group in charge of the reporting is generally the ultimate parent entity of the group. Luxembourg entities that are members of an MNE group are also required to notify the LTA of the identity and tax residence of the reporting entity (whether this reporting entity is the Luxembourg entity itself or any other entity of the group). Based on the legislation currently in force, there is no requirement to prepare a master file or a local file, as defined in Action 13 of the BEPS Action Plan. However, a draft law (No 8186) complements paragraph 171 of the LGTL, add - ing that associated enterprises are required to present, on request, documentation justifying the transfer pricing policy they applied. The scope, content and extent of the documentation
referred to in this new draft provision is laid down in a draft Grand-Ducal regulation which refers to the local file and the master file and details their content, in line with the standards defined in Action 13 of the BEPS Action plan. Thus, as soon as this draft law is in force, master files and local files will have to be prepared by taxpayers and will have to be provided to the tax authori - ties upon request. 9. Alignment With OECD Transfer Pricing Guidelines 9.1 Alignment and Differences Since Luxembourg legislation does not provide for any integrated transfer pricing legislation, the OECD Transfer Pricing Guidelines play an extremely important role for Luxembourg tax - payers when analysing their transactions from a transfer pricing point of view and for tax authori - ties to assess the transfer pricing policy of tax - payers. Reference to these guidelines is made in the parliamentary documents related to the Luxembourg transfer pricing legislation, as well as in the related guidance of the LTA. Therefore, the position of the LTA should be fully aligned with the OECD guidelines and taxpayers should use these guidelines as a reference. 9.2 Arm’s Length Principle Luxembourg tax law follows the arm’s length principle. 9.3 Impact of the Base Erosion and Profit Shifting (BEPS) Project The development of the Luxembourg transfer pricing legislation as from 2015 is the direct impact of the outcome of the BEPS project in transfer pricing matters. As such, the BEPS project has impacted Luxembourg legislation significantly. The wording of Article 56bis of the
244 CHAMBERS.COM
Powered by FlippingBook