Transfer pricing – the head-cracker of Luxembourg tax advisers in the future?

In Uncategorized by Michael Probst

Unfortunately, I believe that the reply to the question I asked myself is: “Yes”. While the focus in Luxembourg currently is the transfer pricing circular for intra-group financing in its new version dated 27 December 2016, I think that the large wording of Article 56bis of Luxembourg Income Tax Law – which is by no way restricted to group financing, but is applicable generally and on all transactions between related companies – is not sufficiently considered.

One could say, that for Luxembourg, it is only (or at least mainly) group financing which is of interest, but what about management services, royalties, marketing and other functions, taken by group entities and invoiced to Luxembourg or from a Luxembourg entity to a related company somewhere in the world.

Also, the new rules referred to, require the documentation of the transfer pricing policy applied. Nothing new for TP-specialists, who have already established such documents for other (i.e. non-financial) clients in other countries.

The question appears: Will Luxembourg request such a documentation and when will it request such documentation?

My answer: It may not, at least not immediately, but it can now. Considering that Luxembourg has learned to apply its tax laws more and more strictly in the last years, it may only be a matter of time until a first request will land on the desk of a surprised tax adviser….


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