ATOZ Insights - May 2024

As the sun's rays make their timid appearance, time has come to highlight the latest news since the start of 2024, from Luxembourg and abroad.

On 31 May 2024, a law introducing various measures to revive the construction sector was published. Some measures are limited to 2024, while others are structural. We provide a commentary of the tax measures introduced, including the various Grand-Ducal Regulations and the amendments proposed during the legislative process.

In a landmark decision issued on 20 February 2024, the Administrative Court affirmed that taxpayers, under specific conditions, have the right to invoke the “substance over form” principle, which is thus not exclusively available to the tax authorities. We analyse this ruling reinstating some equity in the relationship between the tax authorities and the taxpayer.

On 25 March 2024, the Luxembourg tax authorities published an FAQ aiming to clarify the application of the Pillar Two law and more particularly the transition rules regarding the tax treatment of deferred tax assets and liabilities. We analyse these clarifications.

At EU level, the ongoing direct tax initiatives in the pipeline of the European Commission have not evolved that much over the past few months. Except for the “FASTER” proposal for which the Council has recently reached an agreement (general approach) on new rules for withholding tax procedures, the outcome of most of the directive proposals on the table is uncertain (i.e. the “BEFIT package” as well as the “Unshell”, “SAFE” and “DEBRA” initiatives). We provide an overview of the state of play on each of the proposals as well as of the text on the Pillar One multilateral convention.

The Court of Justice of the EU rendered its VAT decision in the so-called “Feudi” case on 7 March 2024. In this ruling, the Court concluded that the amount of turnover cannot be used to challenge the status of a VAT taxable person or to limit the VAT deduction right of a company. We provide an analysis of this ruling as well as its Luxembourg implications.

Still at EU level, the so-called “Mobility Directive” is expected to be soon transposed into Luxembourg law. We describe the implications of this transposition to the extend it concerns so-called “EU Cross-Border Operations”.

We hope you enjoy reading our Insights.