On 28 March 2023, the Luxembourg government submitted Bill No. 8186 to the Parliament. The bill includes changes in advance pricing arrangement (APA), mutual agreement procedure (MAP), compliance with transfer pricing documentation requirements, and general tax procedures. The changes outlined in the bill will become effective upon their publication in the Official Gazette, with certain provisions taking effect from either 1 January 2024, or fiscal year 2024. The key changes proposed in the draft bill are as follows:
New procedures for APA and MAP
Luxembourg introduces a new procedure for bilateral and multilateral Advance Pricing Agreements (APAs) under double tax treaties.
- Taxpayers would be required to submit their APA request in writing to the Luxembourg Direct Tax Authorities or their representative.
- Bilateral or multilateral APA will be concluded between the competent authorities of the relevant states under the MAP legal framework.
- The APA would be concluded in accordance with the legal framework of the MAP outlined in the income tax treaty between Luxembourg and the relevant state.
- Taxpayers would be required to pay an administrative fee to cover the costs associated with processing their APA application. The fee would vary between €10,000 and €20,000, based on the complexity of the request and the amount of work required to process it.
- A Grand-Ducal regulation will determine the procedure applicable to prior bilateral or multilateral agreements as well as to the collection of the fee.
Compliance with transfer pricing documentation
New transfer pricing documentation requirements would be introduced in line with the OECD guidelines, applicable from the tax year 2024.
- The proposed bill requires that taxpayers share readable electronic versions of requested documents, including transfer pricing documentation, whenever such versions are available.
- Luxembourg tax-resident associated companies and permanent establishments (PEs) forming part of a group subject to country-by-country (CbC) reporting rules must present a Local file to substantiate their transfer pricing policy upon request.
- A Master file would be required for Luxembourg tax-resident companies and PEs that have a turnover exceeding €100 million or assets worth over €400 million in a financial year.
Appeal against tax assessment
The taxpayer can only appeal an estimated assessment of income or net wealth if they can demonstrate that the difference between the actual income or net wealth and the assessment made by the tax authority is more than 10%.
Procedures for tax appeal
Taxpayers who wish to appeal a tax assessment must submit a written request, signed by the applicant or their representative, to the Director of Direct Taxes. The appeal must include the following information:
- the claimant’s name, address, and contact details;
- the decision being appealed;
- the subject of the appeal;
- a summary of the facts and reasons for the appeal;
- details of the representative;
- and a list of supporting documents.
Payment of tax in installments
Taxpayers facing significant financial difficulties may request to pay their taxes in installments to the tax authorities. However, interest on late payments will still apply.
