Transfer pricing has become the hot topic in Luxembourg taxation over the last few years in an environment that relies increasingly less on tax rulings. In the past, businesses viewed tax rulings as a way to provide certainty and avoid risks when structuring investments or intra-group transactions. However, for a number of reasons this is no longer the case. This means that multinationals and international investors need to develop a solid strategy for transfer pricing and related documentation. In this blog, I would like to suggest some best practice recommendations which should help businesses define a reasonable approach towards transfer pricing.
In September I suggested that one way to diversify the economy could be through a lower total corporate income tax (CIT) rate in my blog “Using fiscal policy to diversify Luxembourg’s economy.” In November, our ATOZ TaxTrends surveyshowed that among decision makers in Luxembourg, 73% felt that lowering the CIT to 15% would be an important incentive for businesses. It appears that the majority of the decision makers also agree that the Luxembourg total CIT (currently 29.22%) should be lower, and after some research and analysis, I think that the facts agree as well.
Last week, the OECD Global Forum on VAT met in Paris to discuss International VAT/GST Guidelines, focusing heavily on VAT treatment of international trade in services and intangibles, with an aim to level the playing field among countries. When the VAT reforms for 2015 were announced, many media outlets expressed concern that Luxembourg would lose its coveted status as a hub for e-commerce firms. As the year winds to an end, we can now draw our own conclusions about what has changed and what has stayed the same. It’s clear that Luxembourg is ahead of the curve; the 2015 changes to VAT brought the country closer to meeting proposed global standards and complying with BEPS recommendations. But what were the real consequences of these changes? And how can we be best prepared for a ‘new normal’ in VAT?
Finance is a sector that has the ability to generate large amounts of money without requiring large amounts of manpower. It’s a boon, but it’s also a bane. In the past few decades, Luxembourg has been able to top the list of per capital GDP in Europe through the development of this rather abstract industry, all while becoming an increasingly easy target for the critical European media.
Summer is almost here and a great number of us will be hopping on a plane and flying off to a holiday destination. In anticipation of the travel season, we’re looking at some of the more confusing rules, or rather lack of harmonization governing Value Added Tax (VAT) in passenger transport in the European aviation industry.
In Greek and Roman mythology, Janus is the god of gates and doors. He has two faces: one which looks to the future and another one which looks to the past. It is the image I’ve chosen to represent the current European commission whose paradoxical nature, like that of two-faced Janus, has left me and my peers somewhat perplexed. This morning, I read the big announcement by Apple in Ireland in the Financial Times. If you haven’t heard the news yet, Apple has announced to its investors with its Q-10 filing to the SEC (p.21) (link) that if the European Commission were to decide that Ireland provided them with favorable tax treatment and state aid, the company could be liable to pay back taxes for the past decade. For Apple, this penalty would set records. Big names like Apple, Fiat, Starbucks, and Amazon have been in the sightlines of the EU Commission for some time. Only today, however, did one of these companies hint at how much damage a Commission decision could inflict upon the finances of the company.
Last year, a new voluntary certification for companies was introduced in the UK. It is known as the Fair Tax Mark and it’s a first of its kind. Companies who wish to be certified must hand over their accounts and disclose their effective tax rates each year. Companies must also pledge to stay out of tax havens and away from aggressive tax planning schemes. Some companies in the UK have already been awarded the mark including LUSH cosmetics and the energy company SSE. Simply put, this certification is a marketing tool for companies (who are under no legal obligation to pay someone else’s idea of a “Fair Tax”) and it’s a very telling illustration of which way current public opinion is heading.
Firstly, I’d like to take the time to thank all of our readers for following our blog and wish everyone a very Happy New Year 2015. Last year was an exceptional year for our Firm. We celebrated our 10-year anniversary in September with a visit from famed entrepreneur Sir Richard Branson who shared with us his simple recipe for success: loving what you do. Richard is one man, however, while we here at ATOZ are one team. Our own recipe for success is building a strong team of passionate and dedicated people who love what they do. And we’re starting 2015 off on the right foot with some great news: three of our Directors have now been promoted to Partners and two new Directors have joined our International and Corporate Tax team.
he New Year is almost upon us, and 2015 is slated to bring with it lots of changes to Luxembourg’s tax and banking environment. We will see the official end to banking secrecy, increases to VAT rates, an evolving e-commerce regime, as well as the remaining 8 of the 15 OECD recommendations for BEPS. As tax planners we have to be ready to handle these changes. We know that tax law is not written in stone; it’s constantly being revised to best fit the current economic, political, and social context. At this mid-point of 2015, the decade’s trend seems to be heading in a direction of substance, coherence and transparency on all fronts, including VAT.
The word on everyone’s lips this year in the tax world is BEPS (base erosion and profit shifting). We’ve been hearing more and more about the OECD BEPS action plan as each of the 15 actions in the plan is revealed. In September of this year, the OECD released reports on the first 7 of the 15 actions. We can now see the direction in which the OECD is heading.