Peter Moons and Gaspar Lopes Dias contribute to the Luxembourg chapter of the comparative overview published by Bloomberg and answer the following questions:
1. Briefly describe the transfer pricing documentation and tax return disclosure requirements in your jurisdiction.
2. In recent years, have the tax authorities changed or modified their audit approach? (e.g., increase in staffing and/or increase in funding with respect to the transfer pricing audit function; use of risk assessment tools or data mining tools to identify audit targets; use of joint or coordinated audits, etc.). If risk assessment tools are used, what factors are typically analyzed?
3. Do the tax authorities focus on certain types of transactions? (e.g., intangibles, financing transactions, commodities, etc.).
4. Do the tax authorities rely on BEPS-related concepts during its audits? (e.g., DEMPE analysis, new approach for hard-to-value intangibles, expanded use of profit splits, use of risk assessment framework, etc.).
5. Do transfer pricing penalties apply in your jurisdiction? If so, what can be done to mitigate these penalties?
6. Please describe any challenges taxpayers face in preparing their transfer pricing documentation in light of these changes in the audit process.