Insights July 2021


Summer is already in full swing, so it is time to provide you with a few insights on what has happened in Luxembourg in the past few months.

On 2 June and 28 July 2021, the Luxembourg tax authorities updated their circular dated 8 January 2021 on the interest limitation rules to provide more guidance in relation to the safeguard clause for entities in consolidated groups, also called the “equity escape clause”. We explain and comment the guidance provided by the tax authorities.

On 11 May 2021, the Luxembourg Administrative Tribunal ruled on whether contributions to “account 115”, which are capital contributions without issuance of shares, have to be taken into account for the application of the participation exemption regime when computing the acquisition price of a shareholding. We describe and analyse the impact of the Tribunal’s decision denying the taxpayer the possibility to take into consideration such contributions to determine the acquisition price of his participation.

At the beginning of July, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting released a common statement outlining revised OECD Pillar One and Pillar Two proposals, in which they notably agreed on the scope of the proposals and a minimum tax rate for the global minimum taxation. We explain what has been agreed upon and its impact for Luxembourg.

Although the situation is improving, the COVID-19 pandemic is not yet over and continues to impact the good governance of businesses which still cannot operate under fully normal conditions. A few pre-existing measures have thus been extended from a tax and legal perspective to guarantee the continuity of the Luxembourg economy. We describe these measures.

From a legal point of view, on 21 May 2021, the Luxembourg Government presented a bill of law amending the existing Luxembourg securitisation law in order to further increase its flexibility and the legal certainty by clarifying certain market practices valued by market players. We analyse the proposed changes and their tax implications.

From a VAT point of view, on 17 June 2021, the Court of Justice of the European Union released a decision in the frame of two joined cases relating to the question of the applicability of the fund management VAT exemption to outsourced IT and tax services. We go through the key takeaways of this decision and its practical impacts in Luxembourg.

On 3 June 2021, the Court of Justice of the European Union also decided that, for VAT purposes, a property which is let in a Member State does not constitute a fixed establishment where the owner of that property does not have his own staff to perform services relating to the letting. We analyse this decision and its consequences for Luxembourg.

We hope you enjoy reading our insights.

The ATOZ Editorial Team