On 15 June 2018 the Luxembourg government approved 2 new bills of law:
- the first bill of law (“ATAD Bill”) implements the provisions of the Council Directive (EU) 2016/1164 – the so-called Anti-Tax Avoidance Directive (“ATAD”); and
- the second bill of law (“MLI Bill”) approves the OECD’s Multilateral Agreement (“MLI”).
The ATAD was adopted by the Council of the European Union on 28 June 2016 in order to implement the OECD’s recommendations in its Base Erosion and Profit Shifting (“BEPS”) Project. Accordingly, the ATAD foresees new rules to be adopted by all EU Member States in the following 5 specific areas:
- Interest limitation rules
- Exit taxation rules
- CFC rules
- Hybrid mismatch rules
The ATAD Bill transposes these rules into Luxembourg domestic law, using all the flexibility of the ATAD regarding the optional provision for the sake of the continuity, legal certainty and simplification. In addition, the ATAD Bill introduces 2 additional measures not foreseen by the ATAD, i.e. amendments to the roll-over regime on capital gains and the permanent establishment definition. The ATAD Bill has already been filed with the Luxembourg parliament and the text is publicly available.
The MLI was adopted by the OECD on 24 November 2016, together with its explanatory statements, in accordance with Action 14 of the BEPS Project. The MLI implements a number of tax treaty related measures foreseen by the BEPS Project in the following areas:
- Action 2: Hybrid mismatches
- Action 6: Treaty abuse
- Action 7: Avoidance of PE status
- Action 14: Dispute resolution
The MLI Bill has not yet been filed with the Luxembourg parliament and the text is therefore not yet publicly available. We will provide a detailed analysis thereof once the text becomes available.
Both the ATAD Bill and the MLI Bill were expected for some time in order to allow for the timely implementation of the ATAD and ratification of the MLI. The ATAD Bill and the MLI Bill will result in significant changes in Luxembourg domestic tax law and bilateral treaties.
Our tax partners and your usual contacts at Arendt & Medernach are at your disposal to further assess the impact of these bills on your Luxembourg activities.