Tax
Our Tax practice experienced a year of consolidation in terms of topline, with some client sectors showing growth (specifically again the Alternatives industry), while other client sectors (like multinational corporations) or specific services (like Tax Reporting services on Investment Funds) have reached maturity or are progressively phasing out.
It has become extremely difficult for companies to keep up with the constant changes in tax, reporting, and accounting rules, in Luxembourg and globally. We are helping our clients to navigate this ever-increasing complexity, from sustainable strategy, to swift execution and full compliance. Due to the COVID-19 pandemic, governments and tax authorities will also be looking for new tax revenue sources. Tax audits, disputes and controversy will be on the rise. It should bring the topics of how tax risks and compliance are managed and reinforced to the top of the tax executives’ agenda.
Be ready to deal with a constant change in global and local tax rules
Taxpayers need to stay ahead of global and local changes in regulations, such as BEPS 2.0 (Pillars 1 and 2), ATAD 1 and 2, and many local tax reforms. These changes occur at an ever increasing pace and drastically impact tax strategy and compliance obligations. Companies need to ask themselves to what extent their organisation is fit to deal with these developments.
To what extent is a company’s tax management strategy aligned with the latest international tax developments. Is the strategy implemented, monitored and tested accordingly? Is it aligned with the company’s business strategy and the value creation principle? We are advising our clients to align their strategy to these major tax developments. For example, we assist clients with the latest challenges arising from BEPS, ATAD, Transfer Pricing, DAC6, VAT, Tax Reclaims, CbCR, and FATCA/CRS.
Implementing “New Ways of Working” for teams
In Luxembourg, with a high number of cross-border workers, the COVID-19 pandemic brings enormous resource management and tax complexity. Challenges arise around: remote working, virtual workspace, cross border personal, corporate and social security tax obligations, payroll administration and reporting obligations, time and work location tracking, just to name a few focus areas.
PwC Luxembourg launched a “New Way of Working” for its own teams, with priority focus on safety and flexibility. Likewise, we have developed a comprehensive service offering to assist companies and public service bodies in implementing flexible working models tailored to their organisation. Key features include: flexibility, cross-border, virtual and home-based-working. Together with our Advisory colleagues and PwC Legal, we advise our clients from strategy to execution.
Tax audits, controversy and dispute resolution on the rise
Due to the COVID-19 pandemic, governments and tax authorities are looking for new tax revenue sources. PwC observes a significant increase in tax audits, disputes and controversy, internationally but also in Luxembourg. Key areas of focus in Luxembourg tax audits include: Transfer Pricing, Permanent Establishments, corporate reorganisations, and VAT. This trend brings the topics of how tax risks and compliance are managed to the top of the tax executives’ agenda. It starts with gaining a better understanding of the company's risks and exposures, and reinforcing the tax and transfer pricing policies. We are helping our clients to implement robust tax management and compliance policies, to prepare and deal with tax audits and, where needed, to resolve any tax disputes.
Tax function transformation & compliance models
Companies are looking for a responsive and trustworthy service provider to deal with the new rules and to comply with the accounting and tax compliance complexity. An increasing trend is the assistance on tax function transformation. Our complete approach to tax function transformation brings together advanced function design, tax technology and documentation platforms, data management. We are providing a broad range of accounting and tax co- and out-sourcing solutions to our clients. It enables them to focus on strategy and management, while delegating the compliance function to us. To facilitate the management and oversight, we have developed proprietary platforms to serve and connect with our clients. We render our accounting and tax reporting services in Luxembourg and beyond. In the PwC global network and the local market, we have meanwhile established a centre of excellence reputation for our expert Accounting, Tax and Reporting services for all industries where Luxembourg is leading, and notably for Asset & Wealth Management and Alternatives (Private Equity, Real Estate, Infrastructure and Hedge Funds).
2020 and beyond
Looking ahead, we expect to advise on the tax aspects of M&A deals and business reorganisations as our clients plan for growth or survival. At the same time, we anticipate that most governments will focus on protecting and expanding their tax base to solve their fiscal deficits through legislative change and in tax audits. We are ready to support our clients in dealing with these developments. In COVID-19 times, preserving Luxembourg’s competitiveness as an open and leading economy will become ever-more vital. At PwC Luxembourg, we are committed to supporting the government and industry associations as well as other stakeholders, in analysing the international tax policy trends and options.The focus should thereby be on measures that help drive Luxembourg and Europe’s sustainability (ESG) and innovation agenda.
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