Rulings: Limitation of validity period

On 14 October 2019, the Luxembourg 2020 draft budget law was tabled by the Finance Minister to the Parliament (“Draft Budget Law”).

The Draft Budget Law introduces inter alia a new §29b into the Luxembourg General Tax Law dated 22 May 1931 (Abgabenordnung – “AO”), regarding the status of advance tax agreements (“ATA”) issued before 1 January 2015.

As a reminder, in 2014, Luxembourg regulated the ATA practice by introducing a new procedure laid down in §29a AO which sets a maximum five year validity period for ATAs issued after 1 January 2015 (see our October 2014 Newsletter in this respect). ATAs granted before this date were in principle applicable indefinitely. 

Now, the draft §29b AO, which aims at ensuring consistency between the old and new procedure, states that ATAs granted before 1 January 2015 will expire at the end of the tax year 2019 so that only ATAs granted under the new procedure will exist as from the fiscal year 2020. Any taxpayer affected by this change can nonetheless apply for a new ATA to cover subsequent tax years (up to five). 

In this respect, the Luxembourg tax authorities (“LTA”) provided some guidelines in their newsletter released on 3 December 2019 (“LTA Newsletter”), which remain subject to the adoption of the new provisions in their current form. 

In particular, the LTA Newsletter seems to imply that taxpayers affected by the draft §29b AO have the opportunity to file an ATA for transactions already set up but which “have not yet produced all their effects”. In any case, entities having a divergent fiscal year and for which the 2019 fiscal year closed before the end of the 2019 civil year, should have until the end of the 2020 fiscal year to apply for a new ATA.