On 25 March 2024, the Luxembourg Administration of Direct Tax (ACD) released Frequently Asked Questions (FAQs) on the Global Minimum Tax – Pillar 2. The FAQs are related to the enforcement of the Law of 22 December 2023 relating to effective minimum taxation with a view to transposing Council Directive (EU) 2022/2523 of 14 December 2022 (the Law).
The Law includes the introduction of the Pillar 2 income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) to ensure a minimum corporate tax of 15% for large multinational (MNE) groups with annual consolidated revenue of at least EUR 750 million in at least two of the preceding four fiscal years. The rules apply to all domestic and international groups with a parent company or subsidiary in an EU member state. The bill also proposes implementing a qualified domestic minimum top-up tax (QDMTT) for members of in-scope groups and certain safe harbors. The IIR and QDMTT apply for financial periods beginning on or after 31 December 2023, while the UTPR generally applies for financial periods beginning on or after 31 December 2024.
The FAQs address the transitional measures regarding the handling of deferred tax assets and liabilities in calculating the effective tax rate within a jurisdiction under Article 53(2) of the Law.
This includes questions and answers on:
- The relevant financial statements which include the financial records of the Luxembourg Constituent Entity, and/or the Consolidated Financial Statements of the Ultimate Parent Entity;
- Further clarification of the terms – “Reflected in the financial statements” and “Disclosed in the financial statements”;
- Clarification regarding the requirements of the Article 53(2);
On 20 December 2023, the Luxembourg Parliament approved Law No 8292 of 22 December 2023 on pillar two global minimum tax.
