Advance Tax Agreements

The Law of 19 December 2014 on the first part of the future package (paquet d'avenir) introduced into Luxembourg tax laws a clear legal basis for the advance tax agreement ("ATA") process and formalised the existing procedure. A new provision was introduced into the general tax law ("Abgabenordung", "AO").

§29a (2) AO provides that an ATA may not exempt or moderate the tax due. An ATA may merely give prior written confirmation of the correct application of national and international tax laws. This is in line with the prior practice.

An ATA is binding for a period of 5 years unless the description of the situation/operations for which the ATA was introduced are incomplete, inexact, have changed, or are no longer in line with domestic, European or international laws. The 5 years limit was also applicable before the introduction of the new provisions.

Furthermore, on 23 December 2014, a Grand Ducal decree was adopted in order to give further details on the procedure and the conditions required to obtain an ATA (the "ATA Decree").

The ATA Decree provides that the ATA request must be introduced in writing to the tax inspector (préposé) of the tax office in charge, must be duly motivated and must contain at least the following details:

  • precise identification of the applicant;
  • detailed description of the operation or description of the operation(s) seriously and effectively under consideration and which have not yet produced their effects;
  • detailed analysis of the tax issues arising from this operation with motivated tax position from the applicant; and
  • the applicant must confirm that the facts and analysis given are complete and true.

Article 2 of the ATA Decree provides that where the ATA request concerns corporate tax issues, the tax inspector (préposé) submits the ATA request to a commission for advance tax agreements (commission des décisions anticipées; the "Commission").

The ATA Decree states that the purpose of the Commission is to assist the tax office in the uniform execution and implementation of tax laws. ATAs will be published anonymously and in a synthetic manner in the annual report of the Luxembourg Revenue.

Finally, §29a (4) AO provides that corporate taxpayers will henceforth be subject to a fee ranging from EUR 3,000 to EUR 10,000 in order to obtain an ATA. The fee will depend on the complexity of the request and the amount of work involved. The fee will be set by the director of the Luxembourg Revenue upon filing of the ATA request and is payable within one month from the date on which the fee has been set. Finally, the fee is non-refundable if the ATA request is withdrawn, declined or answered negatively.

This new procedure described above is applicable since 1 January 2015 and all ATAs under examination are transmitted without any other formalities to the Commission.

The tax administration is currently preparing a circular as to certain formal requirements under the new ATA procedure. The circular should be issued in the coming weeks.