LUXEMBOURG Law and Practice Contributed by: Oliver R Hoor and Fanny Addouda, ATOZ Tax Advisers
15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions The Luxembourg legislation does not include any restrictions on payments relating to uncon - trolled transactions. There are only restrictions on the tax deduction of payments, which, in cer - tain cases, like in the case of the interest limita - tion rules of the EU Anti-Tax Avoidance Directive (ATAD), also apply to payments to third parties. Luxembourg legislation does not restrict the possibility to make payments relating to con - trolled transactions. However, certain limita - tions exist on the possibility to deduct such payments from a tax point of view. This is the case, for example, of interest and royalty pay - ments made to entities located in a jurisdiction considered as non-co-operative, based on the list released and updated twice a year by the EU Council. Restrictions may also apply when the anti-hybrid rules of the ATAD, as implemented into Luxembourg law, apply. Lastly, restrictions will apply to the part of the remuneration which exceeds the arm’s length price or when a pay - ment is requalified into a hidden distribution. In such case, withholding tax might also apply on the payment. 15.3 Effects of Other Countries’ Legal Restrictions 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions In Luxembourg, there are no specific rules regarding the effects of other countries’ legal restrictions.
16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes According to the Grand-Ducal Regulation of 23 December 2014 (related to paragraph 29a of the LGTL), advance tax agreements, including those covering transfer pricing aspects – ie, uni - lateral APAs – are published in a summarised and anonymised form in the annual report of the direct tax authorities. However, in practice, the information published only includes the number of decisions taken on APA requests and wheth - er the decision was positive or negative. Lux - embourg taxpayers usually do not rely on the APA procedure but rather on the preparation of robust transfer pricing documentation support - ing the positions they take in their tax returns. The very low number of APAs (one single APA in 2023 based on the 2023 annual report of the direct tax authorities) illustrates this quite well. As far as bilateral MAPs are concerned, the annual report of the direct tax authorities also indicates the number of MAPs launched and closed during the year, including those related to transfer pricing. However, no information is included on the content, outcome, etc. Lastly, in line with its commitment under Action 14 of the BEPS Action plan ( “Making Dispute Resolu- tion Mechanisms More Effective” ), Luxembourg provides data and statistics to the OECD on its MAP procedure on a regular basis, including on bilateral APAs. This information is then analysed and published in the form of a peer review report by the OECD. 16.2 Use of “Secret Comparables” Luxembourg does not use “secret comparables” for transfer pricing assessment purposes.
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