Anti-tax avoidance directive

On 20 June 2018, was published the Luxembourg bill (the Bill) implementing the EU Anti-Tax Avoidance Directive dated 12 July 2016 (ATAD 1). The ATAD 1 reflects some of the actions in the OECD’s base erosion and profit shifting (BEPS) project.

While all Member States must implement the ATAD 1, it is worth mentioning that some of its provisions are optional. Consequently, not all Member States will have the same ATAD 1 provisions in their domestic laws.

The Bill contains the following five main provisions:

  • Controlled foreign company (CFC) rules  (applied to fiscal years starting on or after 1 January 2019)
  • Interest limitation rules.The Bill would be applicable to loans issued on or after 17 June 2016. Loans issued before 17 June 2016 would be excluded from the scope of the interest limitation rules provided that they have not been modified after that date. The existing recapture rules would remain in place. The interaction of the new interest limitation rules with the existing recapture rules would need to be further analyzed.The interest limitation rules would apply to fiscal years starting on or after 1 January 2019.
  • Exit taxation. It would apply to fiscal years starting on or after 1 January 2020. However, transfers made prior to 1 January 2020 (under the current regime) would not be impacted by the new provisions.
  • Hybrid mismatches. The Bill would apply to fiscal years starting on or after 1 January 2019.
  • General anti-abuse rules (GAAR). It would apply to taxable years starting on or after 1 January 2019.

Other provisions of the Bill

The Bill also contains two additional provisions that are unrelated to ATAD 1. Effective 1 January 2019, the first provision would repeal article 22bis par. 2 (1) of the Luxembourg Income Tax Law (LITL) which allows (among others) a bondholder to convert a loan into shares in a tax-neutral manner while the second would amend the permanent establishment provision under Luxembourg domestic law.

The Luxembourg parliament will now debate, possibly amend and ultimately vote on the proposed measures.

 

More details on : https://www2.deloitte.com/lu/en/pages/tax/articles/luxembourg-releases-bill-implementing-anti-tax-avoidance-directive.html

 

 

Source: Deloitte Luxembourg | Luxembourg Tax Alert

 

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