On 26 July 2019, the Luxembourg government approved the transposition bill for the amended EU Directive on administrative cooperation in the field of taxation (DAC 6). If you require further information, please refer to our Luxembourg tax alert dated 29 July 2019.
Bill number 7465 (the Bill) is now available to the public on the Chamber of Deputies’ website.
On 5 June 2018, the DAC 6 was published in the Official Journal of the European Union and entered into force on 25 June 2018.
The DAC 6 introduces a new obligation for EU intermediaries, and taxpayers in some cases, to disclose certain cross-border arrangements to local tax authorities that are then shared with other EU tax authorities.
Luxembourg’s directive implementation process is right on schedule, as EU member states must transpose the DAC 6 before 31 December 2019.
The Bill’s wording is very close to the DAC 6’s. However, as the DAC 6 gives some leeway for EU member states to transpose some of its provisions, the Bill contains a few Luxembourg-specific elements.
Concepts and information to report
The DAC 6’s main concepts such as cross-border arrangements, intermediaries, associated enterprises, information to report, etc. are directly transposed into the Bill without any major changes.
Lawyers that are protected by legal client-attorney privilege will benefit from a reduced reporting obligation under the Bill.
Lawyers will have to provide the Luxembourg tax authorities with information about the intermediaries, arrangements, hallmarks and legal rules concerned without disclosing the taxpayer’s identity.
They will have 10 days to inform other intermediaries, or in their absence the relevant taxpayer, who will then have to report any missing information in turn.
Corporate tax returns
Taxpayers will have to include a reference to reportable arrangements in their corporate tax returns.
An absence of, late or incomplete reporting may lead to a fine of up to €250,000.
No grace period or limits on fines are foreseen regarding the retroactive reporting period, which is from 25 June 2018 to 30 June 2020.
However, the Bill’s commentaries state the amount fined will depend on the facts and circumstances of the case.
Hallmarks and main benefit test
The definition of the Main Benefit Test (MBT) is the same as the DAC 6’s.
The Bill clarifies that the MBT also considers tax advantages that are obtained outside of the European Union.
The hallmarks are defined using the DAC 6’s exact wording, so the Bill does not provide further clarification in this respect.
The Bill must now follow the legislative process.
It may be subject to change following discussions in the Chamber of Deputies or comments by the State Council.
The Bill is very similar to the DAC 6’s wording and does not go beyond what was foreseen by the directive.
However, some crucial points, like the hallmarks, still need to be clarified. We hope the Chamber of Deputies and the State Council will provide these clarifications during the legislative process or otherwise the Luxembourg tax authorities in a circular.
KPMG Luxembourg is ready to help you tackle any challenges introduced by the DAC 6 and the Bill.
We provide tailor-made solutions, including analyzing how the Bill will impact your structures, and providing on-site readiness training and customized workshops dedicated to specific subjects.
Our MDR IT solution is also on hand to help you categorize arrangements, monitor deadlines and take care of the reporting process based on EU-wide domestic rules.