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Luxembourg Tax News 2015-13

Luxembourg Tax News 2015-13



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BEPS | EU Tax Transparency – Staying informed

Update March / April 2015
In order to help you stay informed and ahead of the curve on preparing for the potential tax landscape changes, we have summarized below some of the most important tax developments that recently happened at OECD, EU or country level, in the area of tax transparency and the fight against tax avoidance. 

OECD BEPS Action Plan Deliverables marching on

The OECD continued its release of discussion drafts and public consultations in connection with its Base Erosion and Profit Shifting Action Plan (BEPS Action Plan). 


Action 12:Mandatory disclosure rules 

On 31 March, the OECD issued a discussion draft which deals with Action 12 (Mandatory Disclosure Rules) of the BEPS Action Plan. 

BEPS Action 12 requires taxpayers to disclose their aggressive tax planning arrangements. The BEPS Action 12 discussion draft

  • Provides an overview of mandatory disclosure regimes, based on the experiences of countries that have such regimes
  • Sets out recommendations for a modular design of a mandatory disclosure regime including recommendations on rules designed to capture international tax schemes
  • Sets out a standard framework for a mandatory disclosure regime to provide for consistency while allowing flexibility to deal with country-specific risks and to allow tax administrations to control the quantity and type of disclosure 

According to the OECD release, the work on BEPS Action 12 is to be completed by September 2015. Comments on this discussion draft are requested, and must be submitted by 30 April 2015. 

Find out more: discussion-draft-action-12-mandatory-disclosure-rules.pdf (PDF, 673KB) 


Action 3:Strengthening CFC Rules 

On 3 April, the OECD issued a discussion draft which deals with Action 3 (Strengthening CFC Rules) of the BEPS Action Plan. 

BEPS Action 3 recognises that groups can create low-taxed non-resident affiliates to which they shift income. Controlled foreign company (“CFC”) rules combat this by enabling jurisdictions to tax income earned by foreign subsidiaries where certain conditions are met. The discussion draft therefore focuses on developing recommendations for the design of CFC rules to combat base erosion and profit shifting. 

The BEPS Action 3 discussion draft considers all the constituent elements of CFC rules and breaks them down into the “building blocks” that are necessary for effective CFC rules and includes recommendations. These building blocks would allow countries without CFC rules to implement recommended rules directly and countries with existing CFC rules to modify their rules to align more closely with the recommendations, and they include:

  • Definition of a CFC
  • Threshold requirements
  • Definition of control
  • Definition of CFC income
  • Rules for computing income
  • Rules for attributing income
  • Rules to prevent or eliminate double taxation 

The discussion draft also identifies specific questions for which input is required in order to advance the work on CFC rules. 

The work is to be completed by September 2015, and interested parties are invited to send comments on this discussion draft (due by 1 May 2015). A public consultation meeting on BEPS Action 3 will be held in Paris on 12 May 2015. 

Find out more: discussion-draft-beps-action-3-strengthening-cfc-rules.htm


Action 11: Improving the analysis of BEPS 

On 16 April, the OECD released a discussion draft pursuant to BEPS Action 11 (Improving the analysis of BEPS).The mandate of BEPS Action 11 is to establish methodologies to collect and analyze data on BEPS and the actions promoted to address base erosion and profit shifting. 

BEPS Action 11, therefore, focuses on improving the availability and analysis of data on BEPS, such as monitoring the implementation of the BEPS Action Plan and evaluating the effectiveness and economic impact of actions to address base erosion and profit shifting on an ongoing basis. 

The BEPS Action 11 discussion draft sets out the context and background to the work on Action 11, and includes chapters that focus on three key areas:

  • Chapter 1 is an assessment of existing data sources relevant for BEPS analysis, describing the available data and their limitations for undertaking an economic analysis of the scale and impact of BEPSand BEPS countermeasures.
  • Chapter 2 provides potential indicators of the scale and economic impact of BEPS and their various strengths and limitations.
  • Chapter 3 sets existing empiric analyses of BEPS and proposes two complementary approaches to estimating the scale of BEPS.

Specific questions where input is required in order to advance the work on BEPS Action 11 are identified. This work is to be completed by September 2015, and comments have been requested (and due by 8 May 2015). A public consultation meeting on BEPS Action 11 will be held in Paris at the OECD Conference Centre on 18 May 2015. 

Find out more: discussion-draft-beps-action-11-data-analysis.htm

BEPS measures – Local implementation phase: watch out!

Luxembourg / BEPS Action 5 – IP regime 

Determining which intellectual property regimes (IP) can be considered harmful tax practices is one of the objective of the BEPS project falling under Action 5. In this respect, one of the OECD proposals is to ensure that there is a substantial activity in any IP regime and is based around a so-called “modified nexus approach,” which allows a taxpayer to receive benefits on IP income in line with the expenditures linked to generating the income. The OECD proposal also aims at reducing the type of assets eligible to the IP regimes.  

The Luxembourg Finance Minister, Mr. Gramegna, recently confirmed that Luxembourg will follow the “modified nexus approach” for the Luxembourg IP regime, as agreed under BEPS action 5. Consequently, Mr. Gramegna notably confirmed that Luxembourg should start – already in 2015 - the legislative process to modify its IP regime.  

Based on the OECD proposal, the entry into force of the Luxembourg IP regime compliant with the new rules is expected to be no later than 30 June 2016. Furthermore, a grand-fathering period should be granted (for all taxpayers already benefiting from the existing regime) until 30 June 2021 at the latest.  

At OECD level, work on the practical implementation of the nexus approach is ongoing and will be finalized by 30 June 2015 and the agreed approach and additional guidance will be included in the next progress report on Action 5.  

Find out more: g20-remarks-session-5-international-tax-issues.htm


UK / BEPS Action 2 (Hybrid Mismatch Arrangements) - Diverted Profits Tax  

BEPS Action 2  

This area is one to watch closely now as Action 2 discussion draft states that jurisdictions can begin to implement domestic legislative recommendations from the BEPS report issued in September 2014. As one of the first movers, the United Kingdom (UK) has indicated its intention to introduce legislation effective 1 January, 2017, generally adopting the OECD’s recommendations with respect to hybrid arrangements.  


Diverted Profits Tax  

The UK’s Finance Bill 2015 includes a new Diverted Profits Tax (DPT), at a rate of 25 percent, on multinational company profits that are “artificially diverted” from the UK.  

The DPT is intended to deter and counteract the diversion of profits from the UK by large groups that:  

seek to avoid creating a UK permanent establishment 

use arrangements or entities which lack economic substance to exploit tax mismatches either through the creation of intra-group expenditure or the diversion of income intra- group where it is reasonable to assume that, in the absence of a tax benefit, the expenditure would not have been incurred or the income would have been within the charge to UK Corporation Tax  

This tax on large multinationals is effective since 1 April, 2015. The scope of the provisions make this a significant development for multinationals with U.K. sales and/or operations.  


Spain / BEPS Action 13 - Transfer pricing documentation standards  

On 31 March, Spain issued draft corporate income tax regulations (published for public comments) that follow the recommendations covered by the OECD’s BEPS Action 13 papers on enhanced transfer pricing documentation and reporting standards.  

According to the current wording of the draft regulations, beginning from fiscal year 2016, Spain-based multinational entities having a turnover of €750 million or more, would be required to comply with a new country-by-country (CBC) reporting standard and would be required to file the report in the 12 months following close of the fiscal year. The first CBC reports would be expected to be filed in 2017.  

Along with the CBC obligations, certain Spain based multinationals would also be required to file an extended version of the Master file report, as well as a Local File report for transfer pricing purposes.  

EU - Tax transparency package

On 18 March, the European (EU) Commission presented a package of tax transparency measures as part of its agenda to address corporate tax avoidance and harmful tax competition in the EU. A key element of the tax transparency package is a proposal to introduce the automatic exchange of information between EU Member States on their tax rulings. The tax transparency package aims to provide EU Member States with the information needed to protect their tax bases.  

If approved by all Member States, the proposal for a Directive on automatic exchange of tax rulings must be implemented into their domestic legislation by the end of 2015, and be applied from 1 January 2016.  

Furthermore, it is expected that the EU Commission will publish an action plan on corporate taxation before the summer 2015 that will address, among others, the Common Consolidated Corporate Tax Base (CCCTB) initiative and ideas for integrating OECD/BEPS proposals into EU law.  


For further information, please do not hesitate to contact us.     






Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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