Luxembourg Tax Authorities Issue First FAQ Regarding Pillar Two

• Published date: 02 April 2024
• Subject Matter: Tax, Tax Authorities
• Law Firm: Loyens & Loeff
• Author: Mr Peter Adriaansen, Peter Moons, Aline Nunes, Pierre-Antoine Klethi and Filipa Relvas

On 25 March 2024, the Luxembourg tax authorities released guidance in the form of FAQ on the recognition of pre-regime deferred tax assets and liabilities under the Luxembourg Pillar Two rules. This initial FAQ will be progressively expanded.

Key Takeaways

The FAQ (available here in French) focuses on the recognition of pre-Pillar Two regime deferred tax assets (DTAs) and deferred tax liabilities (DTLs) of Luxembourg constituent entities as foreseen in the Luxembourg Pillar Two law adopted in December 2023 (see our Tax Flash).

• Relevant DTAs and DTLs should be "reflected" or "disclosed" either in the Luxembourg GAAP financial statements of the constituent entity (taking into account the newly issued guidance in this regarding of the Luxembourg Accounting Board available here in French, as regards the determination of the amounts to be disclosed) or in the consolidated financial statements of the ultimate parent entity of the group. In the latter case, the DTAs and the DTLs must be traceable back to the Luxembourg constituent entity in a reliable and consistent manner.
• The word "reflected" means included in the balance sheet, whereas "disclosed" means presented in the notes to the financial statements.
• The FAQ explicitly reconfirms that it suffices to disclose the pre-Pillar Two regime DTAs and the DTLs in the notes to the financial statements, preferably in the...