Luxembourg Budget Law 2020 voted - Pre-2015 Luxembourg tax rulings to lapse at end of 2019

19/12/19

In brief

On 19 December 2019, the Luxembourg Parliament voted to approve the 2020 Budget Law (the Law)[1]. This legislation (Bill n°7500) had been submitted to Parliament on 14 October 2019.

One article in the Law provides that all advance tax agreements issued before 1 January 2015 automatically cease to have any legal effect, as from the end of the 2019 tax year. Taxpayers affected are given the explicit right to submit new requests for advance tax confirmations, which will be handled in accordance with the revised tax authority procedures that have applied since 1 January 2015.

In detail

As outlined in our prior Newsletter dated 14 October 2019 (https://www.pwc.lu/en/newsletter/2019/pre-2015-luxembourg-tax-rulings-to-lapse-at-end-of-2019.html), the purpose of this article in the Law is to bring juridical “coherence” between advance agreements issued before 1 January 2015, and those issued under the revised procedures applying on and after that date.

One specific provision of the post-2014 procedures is that advance tax confirmations cannot have a period of validity longer than five tax years. The article in the Law noted above simply causes the five year period of validity also to apply to pre-2015 agreements.

The Luxembourg tax authorities have already released, on 3 December 2019, a Newsletter providing preliminary clarifications regarding the submission of renewal requests in relation to advance tax agreements that are to expire at the end of 2019, confirming that:

  • All taxpayers may request a renewal of their ruling, to the extent that the transactions covered still potentially produce effects (for instance, the tax treatment of a financial instrument still in place);
  • For taxpayers whose tax year closes on 31 December 2019, the request may still be submitted in the course of 2020;
  • For taxpayers with diverging (i.e. non-calendar year end closing) years, the request has to be submitted before their 2020 closing date, to cover the ongoing tax year.

For ease of reference, please find below the link to the Newsletter from the tax authorities.

https://impotsdirects.public.lu/fr/archive/newsletter/2019/nl03122019.html

Conclusion

Taxpayers should, on a timely basis, discuss with their tax advisors to assess whether any pre-2015 advance confirmations would still be relied upon for the preparation of the tax returns for 2020 or future tax years, and whether or not a renewal request should be filed with the Luxembourg tax authorities.

It is to be noted that, if the current tax law still supports a treatment that is covered by a pre-2015 agreement, the simple lapsing of the pre-2015 agreement of course does not by itself cause the treatment concerned to cease to be valid.

[1] Subject to confirmation by the Luxembourg State Council that no second hearing is required

1. PwC Luxembourg (www.pwc.lu) is the largest professional services firm in Luxembourg with 2,870 people employed from 76 different countries. PwC Luxembourg provides audit, tax and advisory services including management consulting, transaction, financing and regulatory advice. The firm provides advice to a wide variety of clients from local and middle market entrepreneurs to large multinational companies operating from Luxembourg and the Greater Region. The firm helps its clients create the value they are looking for by contributing to the smooth operation of the capital markets and providing advice through an industry-focused approach.

2. The PwC global network is the largest provider of professional services in the audit, tax and management consultancy sectors. We are a network of independent firms based in 158 countries and employing over 250,000 people. Talk to us about your concerns and find out more by visiting us at www.pwc.com and www.pwc.lu.

Contact us

Gerard Cops

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Sami Douénias

Tax Partner, Industry and Public Sector, PwC Luxembourg

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Tax Partner, Alternative Investments, PwC Luxembourg

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Fabien Hautier

Tax Partner, Alternative Investments, PwC Luxembourg

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Thierry Braem

Alternatives Tax Leader, PwC Luxembourg

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Tax Partner, Bank/Insurance, PwC Luxembourg

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Tax Partner, PwC Luxembourg

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Vincent Lebrun

Tax Partner, PwC Luxembourg

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