2016: Luxembourg's Business Landscape

Increased substance requirements, remaining compliant under BEPS-related law changes and the CRS; find out what organisations operating in Luxembourg need to know.

Luxembourg's business landscape saw a number of changes in 2015. One such is the creation of a dedicated Tax Ruling Commission, which has a central role in the overall assessment process.

The handling and processing of requests from taxpayers has become more and more complex and intensive; consequently the tax authorities have had to make additional investments in technical and human resources. To a certain extent, costs resulting from this are to be passed on to taxpayers; and since January 2015, requesting an advance decision has become a payable administrative service. Depending on the complexity of the request (excluding advisor's fees), the amount ranges from €3,000 to €10,000. This fee is payable in advance, and cannot be refunded, even where a request is withdrawn or in the case of a refusal or negative answer after processing.

In order to further increase transparency, in line with various cross-border initiatives, the decisions rendered by the tax authorities will be published in an anonymised summary. This provides useful doctrine for companies that would be in a similar situation, which could avoid unnecessary efforts and costs.

The codification of the arm's length principle (for Transfer Pricing) has resulted in a distinction between cross-border and domestic transactions and an increased demand for TP studies and reports.

Luxembourg's VAT rate increased last year by 2%, to 17% and the introduction of the new Limited Partnership regime (SCSp) has seen an influx of registrations.

Following the country's March 2013 adoption of a law on administrative cooperation between EU member states in the field of taxation, Luxembourg also announced the automatic exchange of information on interest payments from 2015.

So what's in store for companies in Luxembourg in the next 12 months?

FATCA / CRS

Additional classification and reporting is now required by companies to meet the European Foreign Account Tax Compliance Act (FATCA) and OECD Common Reporting Standards (CRS), reporting for the latter of which will apply from 2017 - however data capture is now required (as of 1 January 2016).

The law approving the US FATCA was passed last year and both new reporting obligations are intended to increase transparency globally, with a uniform approach to the disclosure of income earned by...