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Luxembourg: Legislation passed, repeals advance tax agreements and enacts ATAD 2

Luxembourg: Legislation passed, ATAD 2

The Luxembourg Parliament on 19 December 2019 passed the 2020 budget bill.

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The legislation includes expiration of pre-2015 advance tax agreements as well as measures to transpose into Luxembourg domestic tax law the EU Anti-Tax Avoidance Directive 2 (ATAD 2).

The measure relating to the expiration of advance tax agreements issued by the tax authorities before 1 January 2015 provides that these agreements will no longer be valid after 2019. However, taxpayers will be allowed to request a new advance tax ruling under the procedure applicable since 2015. In early December 2019, the tax administration issued a release clarifying the process for obtaining a new advance tax agreement:

  • A new advance tax agreement may be requested if it has not yet produced all its effects as of the date of expiration of the prior agreement,
  • Taxpayers with a diverging year-end must file the advance tax agreement request prior to the end of their 2020 tax year (e.g., 31 March 2020 if the year-end is 31 March) for the new agreement to apply as from 2020 tax year. 

Concerning implementation of ATAD 2, the legislation reflects a clarification on the reverse hybrid provision and extends the scope of existing anti-hybrid rules to additional categories of mismatches and to mismatches with third countries. These new measures will apply to financial years starting on or after 1 January 2020—except for reverse hybrid provisions that will apply as from tax year 2022.

Read a December 2019 report prepared by the KPMG member firm in Luxembourg

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