Insights May 2019

Greetings,

Over the past few months, the Luxembourg legislator went ahead with their tax and legal reforms mainly driven by European Directives and international standards.

At the end of April 2019, the Luxembourg Parliament passed the 2019 Budget including a 1% decrease in the corporate tax rate and specific rules on the application of the interest limitation rule introduced in Luxembourg end of 2018, in cases of tax consolidation. We describe the main 2019 budget provisions.

Luxembourg also ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”). To some extent, the MLI provisions will modify Luxembourg DTTs. We set out the main consequences of this ratification.

As part of the 2019 tax reform passed end of 2018, the permanent establishment (“PE”) definition has been extended to deal with foreign PE of Luxembourg taxpayers. On 22 February 2019, the Luxembourg tax authorities released a circular providing guidance concerning the interpretation of the PE concept in cases where Luxembourg taxpayers have a PE in a treaty country. We consider whether this really brings something new.

Finally, the Luxembourg government launched the process to implement the EU Directive on tax dispute resolution mechanisms in the EU. We present the Luxembourg procedure to resolve situations of double taxation between Luxembourg and one or more European Member States as currently set up in the draft law.

In parallel to the legislative work, the Court of Justice of the EU (“CJEU”) had to answer to questions raised by the Danish Court in relation to cases where the Danish tax authorities refused to apply the withholding tax exemption as provided in the Parent-Subsidiary Directive and the Interest & Royalties Directive. A priori, the decision of the CJEU has a high profile but a low impact. We describe the main lessons to be drawn from this decision.

On 14 March 2019, the Administrative Court of Luxembourg referred three interesting questions to the CJEU in relation to the law dated 25 November 2014 on exchange of information upon request. We delve into the Court’s questions and the potential impact in Luxembourg of the answers to be given by the CJEU.

From a legal point of view, a draft law transposing the Directive on the exercise of certain rights of shareholders in listed companies was tabled with the Luxembourg Parliament on 2 February 2019. We provide an overview of the framework set up by the draft law for promoting communication between listed companies and their shareholders in order to allow greater interactivity between them, in line with the current challenges of increased transparency and long-term value creation.

On 27 March 2019, the CSSF issued a new Circular in order to update its guidelines on the use of cloud computing infrastructure to take into account the experience gained by the CSSF and the supervised entities since the release of an initial circular. We are going through the significant changes introduced by the Circular.

Finally, we provide you with a summary of some other major recent legal developments in areas which may affect your business. Amongst the major developments, we deal with the new anti-money laundering measures, the 2016 company law reform, data protection and Brexit. We also summarise expected developments in areas such as the EU company law harmonisation, protection of trade secrets, shareholders rights and securitisation.

We hope you enjoy reading our insights.

The ATOZ Editorial Team