On 19 June 2018, the Luxembourg Government presented the draft bill n° 7318 (“Draft Bill”) before the Luxembourg Parliament transposing the EU Anti-Tax Avoidance Directive (“ATAD I”) into Luxembourg domestic law.
In line with the issues highlighted by the European Commission in its on-going investigation of Luxembourg state aid cases, the Draft Bill also includes additional amendments to the domestic law to eliminate double non-taxation. The proposed changes affect tax neutral exchanges and the domestic definition of permanent establishment (“PE”). The Draft Bill is yet to be approved by the Luxembourg Parliament and may thus be subject to amendments. Lastly, the Luxembourg Government also approved a bill for the ratification of the Multilateral Instrument (“MLI”).
Transposing ATAD in Luxembourg
ATAD aims at implementing the recommendations made under OECD’s Base Erosion and Profit Shifting Project (“BEPS”) at the EU level. It lays down anti-tax avoidance rules in the following fields:
- Interest limitation rules
- Controlled foreign company (“CFC”) rules
- Hybrid mismatches
- General anti-abuse rules (“GAAR”)
- Exit taxation
For taxpayers falling under this scope, the provisions of the Draft Bill will apply as from 1 January 2019. However, the provisions relating to exit tax will be applicable as from 1 January 2020. The Directive amending ATAD I (“ATAD II”) regarding hybrid mismatches with third countries has not been included in the Draft Bill and will thus be implemented at a later stage. This measure will come into effect in Luxembourg as from 1 January 2020.
Learn more by reading our full article.pdf [ 441 kb ] about EU Anti-Tax Avoidance Directive and Multilateral Instrument in Luxembourg.
For more information about the EU Anti-Tax Avoidance Directive and its transposition into the Luxembourg domestic law, please contact our tax experts, Jean-Michel Hamelle and Jean-Nicolas Bourtembourg.