ATOZ Insights - September 2017

This year again, tax news did not take a summer holiday: in early August, the long awaited draft law introducing the new Luxembourg IP regime was released. As from 2018, the new BEPS-compliant regime will replace the former regime which had to be repealed following conclusions reached on IP regimes as part of the BEPS Action Plan. At the end of August, the Luxembourg tax authorities released a circular describing the practical application in Luxembourg of the mutual agreement procedures (MAPs) provided by the tax treaties signed by Luxembourg. Finally, Luxembourg has signed its first double tax treaty with Cyprus. This is the first Luxembourg tax treaty fully in line with the minimum standards defined in the BEPS Action Plan.

At EU level, after having implemented all BEPS measures in record time and even going beyond what the OECD countries had agreed to undertake in order to fight against BEPS (with ATAD 1, ATAD 2, automatic exchange of tax rulings, country-by-country reporting, etc.), the European Commission considered that more had to be done. On 21 June 2017, the Commission presented a wide-ranging proposal, which introduces new reporting requirements for potentially harmful or aggressive cross-border tax schemes. In its current form, the proposal means that taxpayers and their advisers can expect a wave of new (and largely redundant) reporting. Finally, we anticipate the general data protection rules to be implemented as from 2018 and analyse the far-reaching implications of these rules.

At global level, BEPS implementation keeps moving forward: while more and more countries sign the multilateral instrument aiming at implementing tax treaty related BEPS measures and some countries even start ratifying it, the OECD has been taking further steps. On 10 July 2017, the OECD published a revised version of its Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. One day later, the OECD Committee on Fiscal Affairs released the draft contents of the 2017 update to the OECD Model Tax Convention. The amendments to the OECD Model Tax Convention follow the various conclusions reached in the reports on several BEPS actions. In this issue, we analyse what these changes will mean for private equity funds.

NEW IP REGIME TO BE INTRODUCED IN 2018

OUR INSIGHTS AT A GLANCE

As from 1 January 2018, Luxembourg taxpayers will be able to benefit, under certain conditions, from an 80% exemption regime applicable to income related to patents and copyrighted software The new regime will be BEPS-compliant, and consistent with the OECD report on Action 5 of the BEPS action plan which requires countries to adopt the modified nexus approach IP rights covered by the new Luxembourg regime are: patents defined broadly and copyrighted software. Trademarks and domain names are expressly excluded as they fall into...