Luxembourg has introduced ‘controlled foreign company’ rules, effective for financial years starting on or after 1 January 2019. The new rules could attribute the undistributed income of a low-taxed subsidiary to its Luxembourg parent (where it could be taxed at a higher rate). They will apply where ‘non-genuine arrangements’ have been put in place ‘mainly’ for the purpose of obtaining a tax advantage, as indicated where a Luxembourg-resident company manages the important activities of its low-taxed subsidiary.
Danny Beeton, the senior economist in Arendt’s transfer pricing team, will explain the new rules and how Luxembourg companies can act to minimize the risk of additional taxation.