Luxembourg: recent developments in transfer pricing and tax ruling practice

By Denis-Emmanuel Philippe

The Luxembourg tax authorities are currently carrying out transfer pricing audits, particularly for financing companies. When the transfer prices are not substantiated through proper documentation, the Luxembourg tax authorities do not hesitate to reassess the tax bill, by adding an at-arm’s-length remuneration to the taxable basis. Recent decisions of the Luxembourg courts give further support to these attempts of the Luxembourg tax authorities. It is an understatement to say that transfer pricing is now becoming a serious concern for Luxembourg companies engaging in intra-group financing operations.

Apart from transfer pricing, there is another hot topic in Luxembourg: tax ruling practices. Two information injunctions were adopted by the European Commission on 24 March 2014, requesting Luxembourg to send information about its tax ruling practices and intellectual property tax regime before the end of this month. The aim of these information injunctions is to enable the commission to assess the compliance of Luxembourg’s tax ruling practice with EU state aid rules…

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