On 7 June 2017 the Luxembourg Finance Minister Pierre Gramegna signed, on behalf of Luxembourg, the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which aims to close loopholes in the current bilateral tax treaties and lessen the opportunity for tax avoidance.
The agreement is designed to prevent the abuse of tax arrangements among participating countries but leaves it up to the respective country whether it wants to apply every article in the treaty. Luxembourg has taken full advantage of this option and added restrictions to 16 of the 39 articles in the instrument. The details of those reservations fill 71 pages.
Once Luxembourg and its co-signatories ratify the Multilateral Convention, Luxembourg’s tax treaties will be amended in several important areas. Under the Convention, Luxembourg and its treaty partners also each commit to improving and speeding up processes for dealing with cross-border tax disputes. In relation to tax disputes Luxembourg has committed to mandatory binding arbitration.
