Pillar Two Law to be amended to incorporate OECD Guidance

On 12 June 2024, a draft law was presented to Parliament to amend the Luxembourg law of 22 December 2023 on the minimum effective taxation of multinational enterprise groups and large national groups implementing the EU Directive of 15 December 2022 on ensuring a global minimum level of taxation for MNE groups and large-scale domestic groups in the Union (known as the “Pillar Two Directive”). The draft law incorporates clarifications, interpretations and additional technical provisions resulting from the three sets of administrative guidance published by the OECD/G20 Inclusive Framework on BEPS in 2023.

The proposed amendments to the Pillar Two Law deal with a multitude of aspects of the minimum taxation rules, including clarifications, among others, on the scope of application of the rules (excluded entities, turnover definition, etc.) and on how to deal in practice with several issues, such as mismatches in accounting and tax periods within the group, as well as on specific issues related to the computation of the income and loss, the top-up tax and the domestic top-up tax (e.g. functional currency to apply). Several clarifications are also included on the transitional rules, including the country-by-country reporting safe harbour and the deferred tax assets and liabilities, as well as on administrative/filing obligations.   

In this Alert, our International & Corporate Tax Partner, Andreas Medler, describes some of the main clarifications for Luxembourg funds.