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Luxembourg government to release two bills on ATAD 1 transposition and MLI ratification

Bills on ATAD 1 transposition and MLI ratification

Luxembourg Tax Alert 2018-11


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On 15 June 2018, the Luxembourg government’s council approved a bill for the transposition of the EU Anti-Tax Avoidance Directive (issued in July 2016, ATAD 1) into domestic tax law. This bill contains two additional tax measures.
The Luxembourg government’s council also approved a bill for the ratification of the Multilateral Instrument (MLI).

The text of the bills is expected to be publicly released in the coming days. The approval of the bills by the council is the first step of the legislative process. The bills must now be submitted to the parliament.

ATAD 1 transposition

The bill is expected to be a fair transposition of ATAD 1 and will include provisions related to five main topics — interest limitation, exit taxation, a general anti-abuse rule (GAAR), controlled foreign companies (CFCs) and intra-EU hybrid mismatches. Most provisions of the bill are expected to come into effect from January 2019.

For more details on ATAD 1, please refer to our tax alert.

Other additional tax measures

Based on a statement made by Mr. Gramegna and the subsequent press release issued by the Luxembourg government, the bill will also contain two additional tax measures aimed at avoiding possible base erosion situations and non-taxation of certain income (i.e., upon conversion of debt or in the case of income earned by foreign permanent establishments). No further details have been released at this stage.

MLI ratification

Luxembourg signed in June 2017 the MLI, which was developed by the OECD to integrate BEPS measures into double tax treaties. The bill will enable Luxembourg to ratify the MLI. After its ratification, its application per covered tax agreement (i.e. double tax treaties for which the MLI will apply) will depend on the ratification by the other contracting state and on the type of tax concerned, i.e., withholding tax or other taxes.

For more details on the MLI, please refer to our tax alert.

KPMG Luxembourg comment

The transposition of ATAD 1 into our domestic law, as well as the ratification of the MLI, will represent significant steps in the implementation of the BEPS measures in Luxembourg.

Once the bills are made public, Luxembourg corporate taxpayers engaged in cross-border activities will have to assess and anticipate their possible impact on their operations.

Stay tuned for more details.

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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