Among the tax measures adopted by the Law, those regarding transfer pricing are of particular interest and importance. The enhancement of the transfer pricing framework in Luxembourg clearly demonstrates Luxembourg's willingness to be in line with international standards on transfer pricing. Further, the inclusion into the Luxembourg law of the OECD transfer pricing guidelines in relation to the comparability analysis is welcomed as it clarifies the transfer pricing legal framework in Luxembourg and provides more comfort to taxpayers in relation to their transfer pricing policy. The new provisions should however not substantially modify the current practice as Luxembourg has dramatically changed its approach over the last years to comply with international standards on transfer pricing. The application of the anti-avoidance provision will however create some uncertainties and the approach taken by the Luxembourg tax authorities in respect thereof will have to be closely watched.
Considering the broad scope of new Article 56bis, existing structures with transactions between related parties should generally be reviewed to verify whether they are in line with the new international transfer pricing standards as implemented in the Luxembourg legislation, and any such new transaction should henceforth be assessed to ensure its compliance with articles 56 and 56bis of the Luxembourg income tax law.