On 14 October 2019, in the context of the preparation of the 2020 Luxembourg budget draft law (the "Draft Law"), a new provision has been introduced according to which all advance tax agreements ("ATAs" – also known as "tax rulings") issued before 1 January 2015 will cease to have legal effects, and thus to bind the Luxembourg tax authorities, as from 1 January 2020. According to the comments of the Draft Law, the rationale behind this measure lies in the will of the Luxembourg government to bring judicial coherence between ATAs issued before 1 January 2015 and ATAs issued after this date.
Indeed, since 1 January 2015, requests for obtaining ATAs must, in accordance with paragraph 29a of the Luxembourg general tax law of 22 May 1931, as amended (Abgabenordnung) and the Grand Ducal Decree of 23 December 2014, be examined by an ATAs' commission (Commission des decisions anticipées) to ensure a uniform application of Luxembourg tax laws for all taxpayers (the "ATA Procedure"). Furthermore, ATAs issued after this date are subject to a maximum five-year validity period, contrary to ATAs issued before 1 January 2015, the validity of which was generally not time-limited and challengeable only if the laws or relevant facts on which they were based had changed since their issuance.
Until now, Luxembourg courts regularly ruled that Luxembourg tax authorities are, subject to any change of laws or relevant facts, bound by the ATAs they have been given, even if the administrative practice on certain grey areas has changed since the issuance of the ATAs. This new provision should now put the Luxembourg tax authorities in a better situation to question as of 2020 certain "old" structures (not in line with the current administrative practice) that are until end of 2019 still protected by an ATA issued before 1 January 2015.
Nevertheless, the Draft Law provides the possibility for the taxpayer to file a new ATA, in accordance with the ATA Procedure and thus subject to a five-year period of validity, to secure the tax treatment of the transactions initially covered by ATA issued before 1 January 2015.
Whilst the Draft Law is still subject to change, the provision at hand is very likely to be implemented as currently proposed. As such, any structure secured by an ATA issued before 1 January 2015 should be carefully reviewed to analyse the relevance of the ATA as of 2020 onwards.