Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.
Advance pricing agreements
Availability and eligibility
Are advance pricing agreements with the tax authorities in your jurisdiction possible? If so, what form do they typically take (eg, unilateral, bilateral or multilateral) and what enterprises and transactions can they cover?
Luxembourg law provides the possibility to request a ruling from the Luxembourg tax authorities and this includes rulings on transfer pricing issues (ie, advance pricing agreement or APA). Most APAs are unilateral and deal with the tax treatment in Luxembourg of transactions involving tax resident enterprises. There is no limitation as regards the enterprises and transactions that can be covered by an APA.
Bilateral and multilateral APAs should be available through a mutual agreement procedure. The Luxembourg tax authorities issued in August 2017 Circular LG–Conv DI 60 (www.impotsdirects.public.lu/content/dam/acd/fr/legislation/legi17/lg-convdi-60.pdf) providing additional guidelines related to the mutual agreement procedure. This circular specifically refers to transfer pricing issues.
Rules and procedures
What rules and procedures apply to advance pricing agreements?
The procedure related to APAs is set in Paragraph 29a of the General Tax Law and in a Grand-Ducal decree of December 23 2014. Circular LIR 56/1–56bis/1 of December 27 2016 provides further details regarding enterprises involved in intra-group financing activities. The rules and procedures applicable to any ruling requests also apply to APAs.
The APA request should include a transfer pricing analysis that is compliant with the Transfer Pricing Guidelines of the Organisation for Economic Cooperation and Development (OECD), as well as:
- a precise designation of the taxpayer;
- the parties involved;
- their respective activities; and
- a detailed description of the envisaged operations that have not yet produced their effects.
How long does it typically take to conclude an advance pricing agreement?
The timeframe depends on the complexity of the APA, but a taxpayer can generally expect to conclude an APA within a couple of months of the ruling committee receiving all the relevant information and the filing fee is paid.
What is the typical duration of an advance pricing agreement?
The APA is granted for a maximum period of five years, unless the economic circumstances have changed or if the APA subsequently no longer complies with domectic, EU or international laws.
What fees apply to requests for advance pricing agreements?
The filing fees for an APA range from €3,000 to €10,000. The amount will depend on the complexity of the APA.
Are there any special considerations or issues specific to your jurisdiction that parties should bear in mind when seeking to conclude an advance pricing agreement (including any particular advantages and disadvantages)?
The main advantage of concluding an APA is to ensure more certainty in the tax treatment of transactions between related parties. A taxpayer seeking to conclude an APA should be aware that the APA will be automatically exchanged with all the affected jurisdictions (Action 5 of the OECD Base Erosion Profit Shifiting Report).
Click here to view the full article.