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The Luxembourg tax authorities informed on May 4, 2021
Luxembourg taxpayers via the release of corporate tax forms
and related annexes for the 2020 tax year.
With the entry into force of the anti-hybrid rules of the 2nd.
Anti-Tax Avoidance Policy ("ATAD2")
on January 1, 2020 and the introduction of the disclosure requirement
Regulation applicable to tax brokers
("DAC6") on July 1, 2020 reporting
The demands of Luxembourg corporate taxpayers have increased again
this year. As of 2020, corporate tax returns must be submitted by
On June 30th, 2021, taxpayers should take a closer look
Information requested from the tax authorities as soon as possible in
to make sure they can file their tax returns
Time.
Information on reported cross-border agreements within the
Meaning of DAC6
The Luxembourg law of March 25, 2020 implementing the EU
Directive 2018/822 ("DAC6") required
Intermediaries (i.e. tax advisors and other service providers)
report certain cross-border arrangements to Luxembourg tax
Authorities. The main purpose of DAC6 is to increase transparency
by informing the tax authorities at an early stage about
potentially aggressive or abusive tax planning systems and
identify the promoters and users of these systems. DAC6 works
through a system of indicators that can trigger reporting
Commitments and a major benefit test that serves as a threshold
A prerequisite for many of these trademarks. So DAC6 is more of a
complex framework that requires thorough and comprehensive
Analysis of all the facts and circumstances of the transactions
carried out by taxpayers.
While the reporting obligations under DAC6 are generally dormant
with the intermediary they can switch to the respective taxpayer
under certain circumstances.
Cross-border agreements are reported on the basis of DAC6
subject to specific rules and registration requirements and takes place
regardless of the tax returns submitted by the taxpayer. However,
Corporate taxpayers still have to declare their year 2020
Corporation tax ("CIT") return (Tax
Form 500), whether you have used one or more reportable persons
cross-border agreements in tax year 2020. Where this is the case
Case, d. H. in which the DAC6 reporting was filed in relation to a
Transaction by the taxpayer Luxembourg Corporate
Taxpayers must provide the reference (Arrangement ID) of
the cross-border agreements on which in the EU
their corporation tax return for 2020. As a reminder, reporting from
Agreements between June 25, 2018 and June 30, 2020
by February 28, 2021 and 30-day reporting
Period for reportable cross-border agreements
Implementation between July 1, 2020 and December 31, 2020 began on July 1, 2020
January 2021. Since January 1, 2021, reporting has to take place
within 30 days from either the day following the reporting person
cross-border agreements are made available for implementation, or
the day after the reportable cross-border agreement is ready
to implement or when the first step in the implementation of
The reportable cross-border agreement has been reached
occurs first.
Information on hybrid mismatches
On January 1, 2019, the generic anti-hybrid mismatch provisions
included in the first anti-tax avoidance directive 2016/1164 of 12
July 2016 Establishing rules against tax avoidance practices that
directly affect the functioning of the internal market
("ATAD1") were introduced to
Elimination – only in an EU context – of the double non-taxation that has been created
through the use of certain hybrid instruments or units. Hybrid
Mismatches typically result from a different tax treatment of a
Company, permanent establishment or financial instrument as part of the
Laws of two or more jurisdictions and may result in deduction
without inclusion results or double deduction.
These rules were replaced by January 1, 2020
the modified anti-hybrid rules of ATAD2, which also aim at this
Neutralizing the effects of hybrid mismatches which, however, a
wider scope as it covers an extended number of
hybrid mismatch situations with the EU and third countries. The
hybrid non-compliance rules under Article 168ter des
Luxembourg Income Tax Act ("LITL")
target a variety of different situations, including direct hybrids
Mismatches between affiliated companies, structured agreements
Hybrid mismatches and tax residence imported between third parties
Mismatches. The 2020 tax form includes a list of questions (to be
answered "yes" or "no") that aim
enable tax authorities to identify one or more of these hybrids
Mismatch situations.
Because the anti-hybrid rules have changed with effect from 1
January 2020, taxpayers with a financial (and tax) year that
Deviations from the calendar year are subject to two different rates of
Anti-hybrid rules during their 2020 tax year. These will be taxpayers
must provide information for tax authorities to be able to
Analysis of the possible application of the two anti-hybrid rules
which were in effect until December 31, 2019 and the rules that came
Comes into force on January 1, 2020.
Other changes
In addition to the new sections introduced in relation to the
DAC6 reporting and hybrid mismatches, corporate tax
The return form 500 includes a number of other changes, such as:
Update of the sections on the application of the tax
Consolidation system and on the application of the participation
Exemption Scheme, a new section on exemption from profits or
Capital gains from controlled foreign companies
("CFC") and they already were
included in the taxable result of previous financial years,
Sections related to the new deductions related to
the Covid-19 pandemic and deduction from lecture
Exceeding the borrowing costs as well as the determination of the
unused interest capacity carried forward, to name a few. With these
The form for the corporate income tax return has become more in new sections
technical, but also more relevant given the changes to the
LITL was introduced in 2019 and 2020.
Next Steps
With the approval of the tax forms 2020, the information should be available
made available to the Luxembourg tax authorities in relation to the new
The rules introduced in 2020 have become clearer. As part of the
COVID-19 crisis, the law of February 25, 2021 extended the deadlines
for filing the CIT, Municipal Business Tax (MBT), and Net Wealth Tax
(NWT) returns March 31, 2021 through June 30, 2021
the late release of the associated corporate tax forms allows this
Very little time for taxpayers to get ready.
In order to be able to prepare your tax returns properly,
Corporate taxpayers should ensure their situation and
Structure has been carefully checked or consult the tax authorities
Consultant as soon as possible to see if there is
are all hybrid mismatch situations that occur in their global situation
Structure, be it because of the financial instruments used or the
involved bodies. If not already under the
Implementation of their investment structures, corporate taxpayers
should also consult their accountants and others
Intermediaries involved in the implementation of their investment
Structures to determine if there are notifiable agreements
were identified and reported by one of the EU Member States in all EU Member States
the intermediaries.
How we can help
Tax rules are constantly evolving and so are the anti-hybrid rules of
ATAD2 is probably the most complex tax law ever
introduced in Luxembourg. That is why it is very important that
Corporate taxpayers can count on in-depth technical analysis of everyone
the potential tax problems (ATAD2-related, but also other tax problems,
like the CFC rules introduced from January 1, 2019)
arise / have arisen in their investment structures when they (or
their service providers) prepare their tax returns. Here,
Communication between the tax advisor and the service provider
Preparing the tax returns will be key. ATOZ tax advisor and ATOZ
Services offer real integrated services and work hand in hand
We provide first class service and advice to our customers and we believe
that our synergies contribute significantly to yours
Efficiency and will be the key to your success.
We have developed an IT solution for DAC6
Identify transactions that are likely to be reported in the context of
DAC6 to help taxpayers and intermediaries comply with their DAC6
Reporting obligations in that they can be assessed individually
whether and where a cross-border agreement is notifiable or not
applicable to assign the reporting requirement to a specific one
Intermediary. Further information can be found here: www.dac6connect.com.
The content of this article is intended to provide a general overview
Guide to the subject. Expert advice should be obtained
about your particular circumstances.