Lux’s new transfer pricing framework
The Luxembourg Parliament has approved a draft law, effective 1/1/2015, that will provide a formal transfer pricing framework, coupled with relevant transfer pricing documentation.
PwC’s newsletter provides a summary of these developments:
Click to access pwc-luxembourg-transfer-pricing-legislation-formalised.pdf
Summary of key points:
- Alignment with the arm’s length principle as stated in the OECD Model Tax Convention, covering transactions between Luxembourg related parties or cross-border transactions.
- Tax return report of upward, or downward, transfer pricing adjustments whenever the transfer prices do not reflect the arm’s length standard.
- Transfer pricing documentation expectation for the three-tiered approach in accordance with the OECD’s final Chapter V guidelines.
- APA’s: Competent Authority will seek advice for advance tax confirmations from a tax rulings commission for additional legal certainty. The tax confirmation rulings will be published in anonymous and summary form.
Luxembourg sends a strong statement of its alignment with the arm’s length principle and revised OECD transfer pricing documentation guidelines. Tax transparency of the APA ruling process and recognition of transfer pricing adjustments, upward or downward, also provide a revised state of play in this jurisdiction that performs a vital tax and economic role going forward for MNE’s and other tax administrations.
2014 Update to the OECD Model Tax Convention
The 2014 Update, as adopted by the OECD Council on 15 July 2014, includes changes that were previously released for comments, including the meaning of “beneficial owner.” Numerous additions and deletions to Commentaries on various Articles, including positions of non-member countries, are also included. A link to the Update is provided for reference:
http://www.oecd.org/tax/treaties/2014-update-model-tax-concention.pdf
Interesting changes:
The Update requires a comprehensive review to determine potential implications, including beneficial ownership restrictions and ways of working by competent authorities. Such review should distinguish changes to the Articles versus additions or deletions to the Commentary interpreting such Articles. Note that the OECD BEPS changes will be an addition to this Update.
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