On 21 April 2016, less than one week before the traditional State of the Nation speech, new tax measures were announced by the Luxembourg Government as well as changes to the measures presented on 29 February 2016, as part of the 2017 tax reform. While the initial plan was to make the announcement during the State of the Nation speech taking place on 26 April 2016, the Government considered that it was high time to clarify the plan in order to respond to media speculation over the past months. Since the 29 February 2016 announcement, the 2017 tax reform has been THE topic of discussion, in Luxembourg and even beyond. In this edition of ATOZ Insights, we present the tax reform measures that were announced. Notably, they include the expected decrease of the corporate income tax rate. Additionally, Luxembourg has started implementing the EU Directive introducing an automatic exchange of information on tax rulings into Luxembourg law. This will elevate transparency in tax matters to an unprecedented level. Luxembourg has also been quite active in terms of treaty negotiation and renegotiation over the past months. This is the occasion to give you an overview of the Luxembourg tax treaty network and to clarify as from when the recent changes introduced will apply.
We examine a decision of the district court (Tribunal d'arrondissement) in the Hellas case involving the repurchase of convertible preferred equity certificates, a financial instrument commonly used in Luxembourg. This decision influenced a more recent decision of the Administrative Tribunal of 29 February 2016, which ordered a stay of execution in relation to the tax assessment, pending a decision on the merits of the case. It now remains to be seen how the Administrative Tribunal will decide on the tax aspects of the CPEC repurchase. We also comment a recent draft law which, among others, introduces changes to the investment rules of Luxembourg specialised investment funds, part II undertakings for collective investments and companies in risk capital.
At European and global level, BEPS is high on the agenda: the OECD released a public discussion draft on the tax treaty entitlement of non-CIV (Collective Investment Vehicle) funds. This document is part of the follow-up work on action 6 of the BEPS project which deals with the fight against treaty abuse. At EU level, the Dutch Presidency published a BEPS roadmap in February giving high priority to the proposed anti-tax avoidance directive, with a goal of reaching a political agreement by the end of its term. This means that the measures contained within the anti-tax avoidance package released by the EU Commission on 28 January, including the anti-avoidance tax directive, might be adopted sooner than initially expected. However, given the current absence of consensus among EU Member States, the directive will most probably not retain its initial form and already substantial amendments are being discussed and reviewed as part of the political process. We will keep you informed of the developments to come.
We hope you enjoy these insights.
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