On 24 November 2016, the Organisation for Economic Cooperation and Development (“OECD”) adopted the multilateral convention composed of the multilateral instrument (“MLI”) and explanatory statements (“ES”). The implementation of the MLI could result in significant changes to the bilateral tax treaties concluded by Luxembourg and may affect amongst other the tax treaty access of tax transparent entities. Unfortunately the MLI does not address the tax treaty access of collective investment funds and uncertainty remains in this respect.
The MLI implements a number of tax treaty related measures foreseen by the BEPS project, while other non-treaty related BEPS Actions are addressed in the EU Anti-tax avoidance directive (“ATAD”). The practical impact of the MLI will depend on the implementation of the various options provided by the MLI. Although the Luxembourg government has not yet published its position in this respect, at least the Principal Purpose Test clause and the mutual agreement procedure will need to be implemented. As a result, we recommend that our clients review their current investment structures as regards compliance with the MLI and the ATAD and remind you that our tax team is at your disposal to further guide you towards the appropriate solution.
Click on the link below to read the full tax update describing background, content, implementation timing and other aspects of the BEPS measures.