The Parliament of Luxembourg has approved the draft law and has formalized the framework for Luxembourg transfer pricing legislation and introduced the transfer pricing documentation requirements. The new measures are effective from 1 January 2015.
The measures related to transfer pricing are as follows:
- The arm’s length principle applies to transactions between two related entities both located in Luxembourg and where one party is taxed in a foreign jurisdiction.
- The new legislation provides that no advance ruling may be given for purely theoretical or illegal transactions. An advance ruling may only be requested by the concerned taxpayer (and not by a third party) for transactions covered by the advance ruling. The legislation confirms that the tax authorities are bound by the advance rulings they issue.
- Article 3 of Bill no 6722 will provide for a tax of up to EUR 10,000 in consideration of the administrative and operating costs of dealing with a taxpayer’s request for obtaining information and other services. This provision is likely to apply to any requests for advance rulings, such as advance tax agreements (ATAs) and to APAs.
- From 1 January 2015, normal disclosure and documentation requirements apply to transactions between related parties.
