ATAD I

The EU Anti Tax Avoidance Directive 2016/1164 (ATAD 1) was adopted at EU level in July 2016, and EU Member States had until 31 December 2018 to enact the provisions of the Directive into their national tax legislation.

A bill (No 7318) setting out the proposed text of the necessary legislation was published in June 2018. After being sworn in early December 2018, the new Government moved promptly to complete this legislative process. The vote to approve Bill 7318 was taken by the Luxembourg Chambre des Députés on 18 December 2018. The final text of the law differed little from the bill, although some small but important clarifications were made.

The measures now form the Law of 21 December 2018, and mostly enhance Luxembourg’s main corporate income tax legislation, i.e. the Law of 4 December 1967 on income tax Loi concernant l'impôt sur le revenu (LIR).

Most of the provisions in the new law took effect from the first day of the first accounting period starting on or after 1 January 2019. For companies with calendar year-ends, the measures therefore became effective from 1 January 2019 and covered the following points:

• Interest limitation rules;

• Controlled foreign company rules; 

• Intra-EU anti-hybrid rules; 

• General anti-abuse rule “GAAR” revising §6 StAnpG; 

• Revised exit tax rules.

As stipulated in the ATAD I, the measures on exit taxes however took effect a year later, for accounting periods starting on or after 1 January 2020.