ATOZ Insights - April 2023


As the first days of spring gradually bring the first rays of sunshine, it is time for us to highlight what has happened in Luxembourg and abroad over the past few months.

On 27 January 2023, the Administrative Tribunal ruled that the redemption of a class of shares by a Luxembourg company is to be considered as a sale of shares and not as a dividend distribution if the redemption price does not exceed the fair market value of the redeemed share class. We provide an overview of the judgment of the Tribunal and consider its potential implications.

On 24 February 2023, the draft law approving the new double tax treaty with the UK was presented to the Luxembourg Parliament. The new DTT reflects the latest OECD tax standards and amends the rules in relation to the taxation of Luxembourg entities with real estate investments in the UK. We provide an overview of the most important changes to be introduced by the DTT.

On the same day, the draft law implementing the so-called “public country-by-country reporting Directive” was also presented to the Parliament. This Directive requires certain large-scale multinationals to publicly disclose (mainly) the corporate income tax that they pay. We give an overview of the most important aspects of the new reporting requirements to be introduced.

On 15 December 2022, the Council of the European Union formally adopted the Pillar Two Directive. Luxembourg now has to transpose the Directive into its domestic law by 31 December 2023 at the latest. We highlight the impact of this transposition on investment fund managers given that not all investment funds will automatically be carved out from the Pillar Two rules. As the new rules should, in principle, apply to tax years starting as from 1 January 2024, this leaves very little time to adapt.

At European level, the EU list of non-cooperative jurisdictions for tax purposes was updated on 21 February 2023 by adding the BVI, Costa Rica, the Marshall Islands and Russia. This update directly impacts the scope of application of different Luxembourg tax measures. We describe the consequences of this update.

Besides Pillar Two, the European Commission still has a lot of ongoing direct tax projects in the pipeline. We provide an overview of the state of play of various EU direct tax initiatives such as the “Unshell” Proposal and the initiative aiming to tackle the role of so-called “enablers” called the “SAFE” Proposal, but also the “DEBRA” Proposal to address Debt-Equity bias and the “BEFIT” initiative aiming to introduce a common set of rules for EU
companies to calculate their taxable base and an allocation of profits between EU countries, based on a formula. We also assess their chances of succeeding in the near future.

Still at EU level, the EU Commission adopted a new proposal (so-called “DAC8”) for a Directive amending the Directive on Administrative Cooperation on 8 December 2022. The most important amendment concerns far-reaching reporting obligations regarding crypto-assets. We analyse the changes brought about by the DAC8 proposal.

On 8 December 2022, the European Commission also presented the legislative package “VAT in the Digital Age” or “ViDa”. This initiative aims to modernise the VAT reporting obligations through e-invoicing and e-reporting to address the challenges of the platform economy by introducing a new VAT liability for digital platforms and to lead the way towards a single VAT registration within the EU. We set out the main measures of this package.

Finally, on 22 November 2022, the Court of Justice of the European Union ruled that granting public access to the Luxembourg register of beneficial owners (“RBE”) was not compliant with EU Law. This decision has shuffled the decks of the Luxembourg RBE and more generally of EU beneficial owners registers. We explain the judgment, the new procedure to access the RBE in Luxembourg and the possible way forward.

We hope you enjoy reading our insights.

The ATOZ Editorial Team