Pillar 2 law to be amended for DAC 9 and OECD guidance

Bill of law 8591, which implements Directive (EU) 2025/872 (DAC 9) and the January 2025 OECD guidance into domestic law, was submitted to the Luxembourg Parliament on 24 July 2025. It was voted through at first reading on 17 December 2025 with very few amendments.

The new measures establish the operational framework for information reporting obligations under the Luxembourg Pillar 2 minimum tax regime and implement the agreed Administrative Guidance approved by the OECD/G20 Inclusive Framework in January 2025, clarifying the treatment of deferred taxes during the transitional phase.

The main points are summarised below.

Framework for reporting and exchange of top-up tax information returns

The text introduces a standardised form, called the “top-up tax information return”, that is modelled on the “GloBE Information Return” form adopted by the OECD/G20 Inclusive Framework. The form is set out in a Grand Ducal regulation.

The text also sets out the legal basis for the automatic exchange of top-up tax information returns according to the specified dissemination approach. In particular, exchange will be made with jurisdictions that have concluded an “eligible competent authority agreement” with Luxembourg (to be listed in a Grand Ducal regulation).

The exchange includes a general section and jurisdictional sections. Only the sections of top-up tax information returns that are relevant for the application of Pillar 2 rules implemented by the receiving jurisdiction are to be shared. Exchanges will be made with implementing jurisdictions, jurisdictions applying only a qualified domestic minimum top-up tax (QDMTT), and jurisdictions with taxing rights under Pillar 2 rules. These receiving jurisdictions comprise (i) Member States with operational Pillar 2 legislation that have implemented DAC 9, and (ii) non-EU territories with Pillar 2 regimes in force that are signatories to the OECD’s Multilateral Competent Authority Agreement on the Exchange of GloBE Information (GIR MCAA). Luxembourg is a signatory of the latter, having executed the GIR MCCA on 26 June 2025.

There are detailed timelines for automatic exchange, generally requiring exchange within three months after the filing deadline, which in practice means 18 months after the end of the relevant fiscal year. For the first (transition) fiscal year, longer filing deadlines apply, so the first exchanges are expected to take place by 31 December 2026 and no exchange may occur before 1 December 2026.

Cooperation procedures between the Luxembourg and foreign tax authorities are put in place to correct manifest errors in top-up tax information returns and follow up where exchanges have not occurred on time. The authorities must also explain any delays and transmit missing information within set deadlines.

Luxembourg entities that notify the tax authorities they are using the local filing exemption (claiming the return will be filed in another jurisdiction) but cannot prove, upon request by the tax authorities, that the return was actually filed abroad will be subject to a fine of up to EUR 300,000. The parliamentary comments clarify that the higher maximum compared with the existing EUR 250,000 fine for non-filing or incomplete filing is intended to prevent entities from exploiting local filing exemptions to delay submissions.

OECD Administrative Guidance implementation

As a reminder, deferred tax assets (DTA) related to items excluded from the calculation of qualifying income or loss are excluded from the effective tax rate calculation where those DTA are generated in transactions taking place after 30 November 2021. The new measures now exclude the use of certain DTA arising from agreements with public authorities, retroactive elections or options, or the introduction of corporate income tax after 30 November 2021 when calculating the effective tax rate (or the country-by-country safe harbour) under Pillar 2. As an exception, groups may recognise up to 20% of DTA on a transitional basis, but only for specific fiscal years beginning on or after 31 December 2023 or 31 December 2024, as appropriate.

The switch-off rule – whereby no top-up tax is to be computed in Luxembourg for constituent entities located in a jurisdiction that applies a QDMTT – will not be available for a jurisdiction that does not exclude the above DTA from the calculations (except where this jurisdiction limits those DTA to 20% of their initial value during a grace period as detailed above).

For fiscal years ending before 1 July 2030, the Luxembourg filing constituent entity may exercise an option to file a simplified top-up tax information return on a jurisdictional basis where no top-up tax is calculated for that jurisdiction in that year, or where the top-up tax does not need to be allocated constituent entity by constituent entity. This option may only be exercised where the jurisdiction allows the simplified filing procedure for QDMTT purposes. The details and conditions will be determined by a Grand Ducal regulation yet to be published.

Next steps

The new measures come into effect on 1 January 2026. The measures on deferred taxes during the transitional phase apply to financial years starting as from 31 December 2023.