ATOZ Insights - April 2022


We have already enjoyed early spring days, so it is time for our first 2022 ATOZ Insights.

On 9 March 2022, a draft law was presented to Parliament to remove, as from 1 January 2023, the exemption applicable to certain securitisation entities regulated under EU law from the interest limitation rules introduced as from 1 January 2019 following the transposition of ATAD into Luxembourg domestic law. The draft law follows an infringement procedure launched by the European Commission against the way Luxembourg implemented the interest limitation rules of ATAD. We will analyse this repeal.

On 20 January 2022, the Luxembourg tax authorities released a Circular on the new annual 20% real estate levy introduced by the 2021 Budget law. The levy is due on gross rental income and gains arising from real estate assets situated in Luxembourg and realised directly or indirectly by certain categories of investment funds. We will describe the implications of this new levy, notably in terms of reporting and payment obligations.

From an individual tax and social security perspective, despite the fact that the COVID-19 pandemic is slowing down, the possibility for cross-border workers to work remotely has been extended once again. We will update you in this respect. 

Back in December 2022, the European Commission released a Directive proposal, the so-called “unshell proposal”, which aims to fight against the misuse of shell entities for tax purposes and ensure that EU entities with no or minimal economic activity are unable to benefit from certain tax advantages. The unshell proposal introduces a new reporting obligation for entities considered as “at risk to be shell” based on certain gateway criteria and denies certain tax benefits to the undertakings assessed as shell entities because they do not meet some minimum substance indicators and cannot evidence that they are not misused for tax purposes. We will present the rules under the unshell proposal and provide some comments on a proposal which is expected to evolve over the legislative process due to the numerous issues it presents and the clarifications it requires.

On 12 March and 28 March 2022, the EU Council released two compromise texts of the Directive proposal on ensuring a global minimum level of taxation for multinational groups in the EU which differ slightly from the initial Directive proposal published on 22 December 2021, mainly, on the time limit for transposition. Recently, on 14 March 2022, the OECD finally published the long-awaited commentary on the application and practical implementation of the OECD Model Rules which provide for a coordinated system of taxation intended to ensure large MNE groups pay a minimum level of tax on the income arising in each of the jurisdictions they operate in. We will discuss the changes introduced in the amended Directive proposal and some of the guidelines provided by the OECD Commentary.

From a legal point of view, on 3 March 2022, the law of 25 February 2022 amending the Luxembourg securitisation law of 22 March 2004 in order to clarify and modernise the legal framework of securitisation in Luxembourg was published in the Memorial. The new law aims at improving the legal certainty by clarifying certain changed market practices, and increasing the flexibility of the Luxembourg regime towards other jurisdictions. We will explain its legal and tax implications and how it creates new opportunities notably for the active management of securitisation vehicles.

Finally, on 27 January 2022, a draft law was presented to Parliament according to which the Luxembourg Government plans to modernise the operations of the business and companies register (registre de commerce et des sociétés) and of the beneficial owners register (registre des bénéficiaires effectifs) in order to ensure the administrative simplification of the functioning of the registers on the one hand, and the monitoring of the legal compliance of the registered information on the other hand. We will go through the various objectives of this draft law.

We hope you enjoy reading our insights.

The ATOZ Editorial Team