Tax Treatment of Intra-Group Finanicing Activites - Transfer Pricing

06.01.2017 News

On 27 December 2016, the Luxembourg tax administration issued the circular letter L.I.R. Nr. 56/1 – 56bis/1 (the “Circular”) replacing the circulars LIR N° 164/2 and 164/2bis dated 28 January and 8 April 2011. The aim of the Circular is to conform the OECD transfer pricing guidelines for intra-group financing transactions.

Among other measures, the Circular now gives an increased importance to the preparation of transfer pricing reports and strenghten substance requirements for companies operating in Luxembourg as financing entity within a multinational group (“FinanceCo(s)”). Clarifications on advance pricing agreements (“APA”) relating to the Transactions have been given as well. As a side note on important updates for multinational companies with a turnover of more than EUR 750,000,000.-, on the 27th of December, the Luxembourg tax administration has also confirmed that the Country by Country Reports for the financial year 2016 will be exceptionally due by 31 March 2017 rather than 31 Decemeber 2016.

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