Release of 2020 budget draft law – Tax rulings issued before 2015 will not be valid anymore
On 14 October 2019, the Luxembourg government has issued the 2020 draft budget law (the "Bill").
The main tax measure provided by the Bill will affect Luxembourg taxpayers who are relying on a Luxembourg advance tax agreement ("Ruling") issued by the Luxembourg tax authorities prior to 1 January 2015.
The Bill specifies that a new paragraph '29b' will be added to the General Tax Law regarding the expiration, as from the end of the fiscal year 2019, of any Rulings issued before 1 January 2015 (i.e. before the entry into force of the new Ruling procedure).
This new measure will bring coherence to the Luxembourg tax system. Currently, there are two different types of Rulings co-existing in Luxembourg:
- Rulings issued under the "old" Ruling practice (applicable until 1 January 2015): these "old" Rulings were approved by a tax official and were usually valid for an indefinite period of time.
- Rulings issued under the new Ruling procedure (applicable from 1 January 2015): these new Rulings are approved by a tax Commission and have a validity limited to 5 years.
With this new measure, these two types of Rulings issued by the tax authorities will no longer coexist in the Luxembourg tax system.
This means that, in practice, Luxembourg taxpayers can only rely on "old" Rulings issued before 1 January 2015 until 31 December 2019 (i.e. the last possibility to invoke the application of the "old" Rulings will be in their 2019 tax returns).
Therefore, in light of this new measure, structures will have to be carefully reviewed. A new Ruling request (when needed and possible) may be filed in order to continue benefiting from the interpretation of Luxembourg income tax law on specific tax topics. Alternatively, structures may have to be reorganised.
The Bill is currently in the process of parliamentary approval and may have further amendments before its vote.
This new measure constitutes an additional reason to revisit longstanding Luxembourg structures from a tax perspective.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.