Global Tax Alert | 18 December 2018

Luxembourg’s Parliament adopts draft law implementing EU Anti-Tax Avoidance Directive

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On 18 December 2018, the Luxembourg Parliament adopted draft law n°7318 (the Law) implementing the European Union (EU) Anti-Tax Avoidance Directive1 (ATAD), which introduces a limitation to interest deductibility, Controlled Foreign Company (CFC) rules and rules countering hybrid mismatches with the EU. The Law also amends the existing exit taxation regime (including provisions relating to inbound transfers) and the General Anti-Abuse Rule (GAAR). Two existing domestic provisions, being the conversion of debt into equity and the amendment of the permanent establishment (PE) definition, are also amended by the aforementioned law.

The Law, which is expected to be published before the end of December, should generally be in line with the initial draft law of June 2018,2 as amended early December.3 As recently announced by Luxembourg’s Minister of Finance,4 the Law will undergo a further amendment in 2019 to extend, with retroactive effect to 1 January 2019, the interest limitation rules to companies that are within a fiscal unity.

The provisions of the Law apply to tax years starting on or after 1 January 2019, except for the provisions regarding exit taxation that will apply to accounting years, starting on or after 1 January 2020.

A detailed Tax Alert discussing the provisions of the Law as well as their implications will be forthcoming.

Endnotes

1. Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.

2. See EY Global Tax Alert, Luxembourg’s draft law implementing EU Anti-Tax Avoidance Directive: A detailed review, dated 9 July 2018.

3. See EY Global Tax Alert, Luxembourg Government adopts amendments to Draft ATAD Implementation Law, dated 7 December 2018.

4. See EY Global Tax Alert, Luxembourg Minister of Finance announces interest limitation will apply at fiscal unity level, dated 12 December 2018.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Advisory Services Sarl, Luxembourg City
  • Marc Schmitz, Tax Leader
    marc.schmitz@lu.ey.com
  • Dietmar Klos, Financial Services Tax Leader
    dietmar.klos@lu.ey.com
  • John Hames, Global Compliance and Reporting Leader
    john.hames@lu.ey.com
  • Bart Van Droogenbroek, International Tax Services Leader
    bart.van.droogenbroek@lu.ey.com
  • Olivier Bertrand, Transaction Tax Leader
    olivier.bertrand@lu.ey.com
  • Nicolas Gillet, Transfer Pricing
    nicolas.gillet@lu.ey.com
  • Christian Schlesser, OME – Transfer Pricing
    christian.schlesser@lu.ey.com
Ernst & Young LLP, Financial Services International Tax Desks – Luxembourg, New York
  • Jurjan Wouda Kuipers
    jurjan.woudakuipers@ey.com
  • Hicham Khoumsi
    hicham.khoumsi1@ey.com
  • Michel Alves de Matos
    michel.alvesdematos@ey.com
Ernst & Young LLP, Luxembourg Tax Desk, New York
  • Serge Huysmans
    serge.huysmans@ey.com
  • Xavier Picha
    xavier.picha@ey.com
Ernst & Young LLP, Luxembourg Tax Desk, Chicago
  • Alexandre J. Pouchard
    alexandre.pouchard@ey.com
Ernst & Young LLP, Luxembourg Tax Desk, San Jose
  • Andres Ramirez-Gaston
    andres.ramirezgaston@ey.com

EYG no. 012422-18Gbl