Luxembourg Budget 2020: pre-2015 Luxembourg tax rulings to expire at the end of tax year 2019
The 2020 budget bill of law, filed with Parliament on 14 October 2019, provides for the automatic expiration of pre-2015 tax rulings upon completion of the fiscal year 2019. The bill also provides that affected taxpayers may request a new ruling (valid for five years) under the current procedure.
The government motivated the proposed measure as bringing the term of validity of pre-2015 rulings in line with that of rulings granted under the current ruling request procedure. With effect as from 1 January 2015, Luxembourg had formalized such procedure, amongst others by establishing a ruling committee, introducing an administrative fee and limiting the validity of tax rulings to five years. It furthermore laid down the requirement that advance tax rulings can be obtained only before the transaction in question is carried out.
The bill of law indirectly confirms that taxpayers should still be able to rely on their pre-2015 tax rulings for the tax years up to 2019, to the extent they did not expire out of their own right. Should the taxpayer want similar comfort for subsequent tax years, a new request may be filed under the current procedure. The proposed explicit language to that effect, referring to the formal procedure, seems to imply that the fact that a renewed ruling request would be filed only long after the transaction had occurred, is not an obstacle.
For companies with book years diverging from the calendar year, the proposed measure – as currently worded - would effectively be retroactive to the beginning of their book/tax year started during 2019. For example, if a taxpayer has a book/tax year running from 1 April to 31 March, the 2019 tax year ended on 31 March 2019. If the proposed measure is enacted without amendment, the tax ruling would no longer be binding for the tax year that started on 1 April 2019.
The proposed measure also impacts the annual net wealth tax. If Parliament accepts the provision as it is worded in the bill of law, it would take effect on 1 January 2020. This would also mean that it is immediately relevant for net wealth tax due as per 1 January 2020.
Taxpayers who currently rely on pre-2015 tax rulings should consult their tax advisers to assess:
- the need for additional comfort brought by the tax ruling; and
- the exposure to a potential challenge by the tax authorities as from tax year 2020.
We will keep you informed of further developments. Should you have questions, please contact your trusted Loyens & Loeff adviser.
Peter MoonsPartner Attorney at law / Avocat à la Cour / Tax adviser
Peter Moons, partner, is a member of the Tax Practice Group in our Luxembourg office. He focuses on cross-border corporate tax advice for multinationals and funds, in particular private equity funds, their initiators and their investors.T: +352 466 230 244 E: firstname.lastname@example.org
Willem BonPartner Tax Adviser
Willem Bon, partner, is a member of the Tax Practice Group in our Luxembourg office. He focuses on cross-border tax issues, advising mainly multinational enterprises, investment funds, as well as wealthy individuals and families.T: +352 466 230 214 E: email@example.com
Frank van KuijkPartner Tax Adviser / Attorney at Law / Avocat
Frank van Kuijk, partner, is a member of our Investment Management and Tax practice groups in our Luxembourg office. He focuses on the structuring and regulatory work for alternative investment fund managers. Within the Investment Management Practice Frank heads the tax team integrated therein.T: +352 466 230 330 E: firstname.lastname@example.org
Pierre-Antoine KlethiSenior Associate Attorney at law / Avocat / Tax Adviser
Pierre-Antoine Klethi, senior associate, is a member of the Tax and Investment Management Practice Groups in our Luxembourg office. He focuses on corporate taxation (including relevant international developments), fund structuring and EU State Aid investigations.T: +352 466 230 429 E: email@example.com