Tax has played a significant role in helping individuals and businesses alike survive the
economic consequences of Covid-19. Various initiatives and relief programs have helped breathe life into the economy during a once-in-a-life-time challenging period.
Covid-19 tax measures for businesses
Need a refresher on the latest Covid-19 tax measures for business? We highlight three key points to keep in mind below.
1. Corporate tax returns 2019:
There is no extension for filing deadlines in the law but there is administrative tolerance until 31 March 2021.
2. Corporate tax returns 2020:
There is an extension in place with a filing deadline of 30 June 2021.
3. Shareholder and board meetings:
Remote shareholders and board meetings (no physical presence of the members required) allowed until 30 June 2021.
Covid-19 tax and social security measures for individuals
Before we know it, June will be here and so will the end of the filing deadline extension for 2020 income tax. We bring clarity and act as a reminder for all the deadlines you should know as an employee in the Grand Duchy.
Extension of individual tax returns filing deadline:
- 2019 income tax return: 31/03/2021
- 2020 income tax return: 30/06/2021
- Foreign interest, opting for the 20% withholding tax (RELIBI): 30/06/2021
- Option for married/partnered people to be taxed individually: 30/06/2021
Cross border situations:
- Belgium, France and Germany have agreed with Luxembourg to extend their position of disregarding homeworking days for social security purposes until 30 June 2021.
- Bilateral agreements have been signed between Luxembourg and respectively Belgium and France to disregard homeworking days for tax purposes until 30/06/2021.
- For Germany, the tax agreement is automatically extended on a monthly basis until one of the competent state authorities denounces this agreement, at least one week before the start of each following calendar month.
Addressing Covid-19 and transfer prices
While the Luxembourg tax authorities have not issued formal transfer pricing guidance regarding the impact of the Covid-19 pandemic, Luxembourg follows the recommendations of the OECD very closely. In this respect, the Luxembourg tax administration will most likely rely on the guidance for transfer pricing implications of COVID-19 released by the OECD on 18 December 2020.
The guidance focuses on four priority issues:
- Comparability analysis
- Losses and the allocation of COVID-19 specific costs
- Government assistance programs
- Advance pricing agreements (APAs)
These topics may be interrelated and need to be considered together within the analytical framework of the OECD transfer pricing guidelines.
In the context of financing activities, 2020 has been a turbulent year and the following aspects need to be monitored in the FY2020 transfer pricing documentation and, further, in decisions to potentially revisit existing transfer pricing policies regarding liquidity management.
To be monitored:
- Adjustment to working capital to manage group liquidity
- The modification of debt term to ensure group companies can serve their debt
- The intensification of the use of cash pools
- Cautious management and monitoring of interest rate volatility on the markets
Table of contents
Tax impacts of Covid-19 sanitary measures