Harmful Tax Practices – 2019 Peer Review Reports on the Exchange of Information on Tax Rulings

Luxembourg

Luxembourg has met all aspects of the terms of reference (OECD, 2017[3]) (ToR) for the calendar year 2019 (year in review) and no recommendations are made.

Luxembourg can legally issue four types of rulings within the scope of the transparency framework.

In practice, Luxembourg issued rulings within the scope of the transparency framework as follows:

• 1922 past rulings;

• For the period 1 April 2016 - 31 December 2016: 73 future rulings;

• For the calendar year 2017: 18 future rulings,

• For the calendar year 2018: nine future rulings, and

• For the year in review: three future rulings.1

Peer input was received from three jurisdictions in respect of the exchanges of information on rulings received from Luxembourg. The input was positive, noting that information was complete, in a correct format and received in a timely manner.

1 In addition to the rulings in the scope of the transparency framework Luxembourg issued and exchanged 17 rulings relating to "other types of rulings”. These “other types of rulings” cover an additional category of rulings that Luxembourg identified, related to intragroup financing activities which in the absence of transparency may cause BEPS concerns. These rulings are not otherwise covered by one of the five categories within the scope of the transparency framework and are therefore defined as “other type of rulings”. Luxembourg exchanged these rulings with the relevant IF members using the transparency framework.

A. The information gathering process

699. Luxembourg can legally issue the following four types of rulings within the scope of the transparency framework: (i) preferential regimes;1 (ii) cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) rulings providing for unilateral downward adjustments; and (iv) permanent establishment rulings.

700. For Luxembourg, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014. Future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

701. In the prior years’ peer review reports, it was determined that Luxembourg’s undertakings to identify past and future rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. In addition, it was determined that Luxembourg’s review and supervision mechanism was sufficient to meet the minimum standard. Luxembourg’s implementation remains unchanged, and therefore continues to meet the minimum standard.

702. Luxembourg has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

703. In the prior years’ peer review reports, it was determined that Luxembourg’s process for the completion and exchange of templates were sufficient to meet the minimum standard. With respect to past rulings, no further action was required. Luxembourg’s implementation in this regard remains unchanged and therefore continues to meet the minimum standard.

704. Luxembourg has international agreements permitting spontaneous exchange of information, including being a party to the (i) Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[4]) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) bilateral agreements in force with 81 jurisdictions.2

705. For the year in review, the timeliness of exchanges is as follows:

 

Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	111	0	N/A	N/A

1 In addition to the rulings in the scope of the transparency framework Luxembourg transmitted 28 exchanges relating to “other types of rulings” during the year in review.

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	45	1.5 months	0

706. Luxembourg has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges. Luxembourg has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

707. The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to a preferential regime	De minimis rule applies	N/A1
Cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	0	N/A
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	0	N/A
Permanent establishment rulings	De minimis rule applies	N/A
De minimis rule	11
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	22	Belgium, Finland, France, Germany, Japan, Poland, Spain, Tunisia, United States
Total	332

1 One issued ruling led to nine exchanges.

2 Additional 28 exchanges of “other types of rulings” were transmitted by 31 December 2019 to the following countries: Australia, Belgium, France, Germany, Guernsey, Italy, Jersey, Mexico, Netherlands, Singapore, South Africa, Sweden, Switzerland, United Kingdom and United States.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

708. Luxembourg offered an intellectual property regime (IP regime)3 that was abolished as of 1 July 2016 and is subject to transparency requirements under the Action 5 Report (OECD, 2015[1]). It states that the identification of the benefitting taxpayers will occur as follows:

• New entrants benefitting from the grandfathered IP regime: during the previous peer review year, an IT research application was launched with the aim of identifying the taxpayers who requested the application of the IP regime in their tax return. Some taxpayers only filed their tax return for the fiscal years 2015 and 2016 by late 2017 or in 2018. Information on these remaining new entrants and new IP assets from existing taxpayers was exchanged in 2018, with a small number of additional exchanges taking place early in the year of review. Exchanges took place generally within one month of receipt of the information. This issue is now completed.

• Third category of IP assets: not applicable as the IP regime has been abolished.

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable as the IP regime has been abolished.

709. In addition, Luxembourg offers an IP regime that not is subject to the transparency requirements under the Action 5 Report (OECD, 2015[1]), because:

• New entrants benefitting from the grandfathered IP regime: as this is a new IP regime rather than a grandfathered IP regime, transparency on new entrants is not relevant.

• Third category of IP assets: not applicable as the regime does not allow the third category of IP assets to qualify for the benefits.

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable as the regime does not allow the nexus ratio to be treated as a rebuttable presumption.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

[3] OECD (2017), BEPS Action 5 on Harmful Tax Practices - Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD Publishing, Paris, http://www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparency-framework.pdf.

[1] OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264241190-en.

[4] OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264115606-en.