28/12/2016

On 27 December 2016 the Luxembourg Tax Authorities (Administration des contributions directes) issued Circular Letter L.I.R. – N° 56/1 – 56bis/1 (the “New Circular Letter”) on the tax treatment of companies engaged in intra-group financing transactions.

The New Circular Letter replaces the previous circular letters LIR N° 164/2 and 164/2bis dated 28 January and 8 April 2011 in order to render the Luxembourg transfer pricing rules compliant with the revised Chapter I Section D of the OECD Transfer Pricing Guidelines.

The main amendments may be summarised as follows:

• replacement of the lump sum determination of the equity at risk of 1% capped at EUR 2 million on a case-by-case analysis;
• enhancement of the content of the transfer pricing reports;
• amendments to the minimum substance requirements;
• simplification measure for intra-group financing companies acting as intermediaries; and
• amendments to the list of information to be provided for advance pricing arrangements.

Click on the link below to read the full details of the New Circular Letter.

New Circular Letter on the tax treatment of companies engaged in intra-group financing transactions