The Luxembourg tax authorities issued a new circular addressing the tax treatment of companies engaged in intra-group financing transactions. On 27 December 2016, Circular L.I.R. n°56/1 – 56bis/1 is released which replaces and supersedes the existing circulars L.I.R. n°164/2 of 28 January 2011 and L.I.R. n°164/2bis of 8 April 2011.
The new circular relating to intra-group financing complies with the arm’s length principles of the OECD transfer pricing guidelines. It provides further details on the comparability analysis method to be used in order to apply the arm’s length principle. The new circular is effective from 1 January 2017.
