Trésorier/Treasurer magazine - N°98 - July/Aug/Sep 2017 - 31

FORUM

The revised Circular 56/1 and 56 bis/1 covering intragroup financing activities (effective 1 January 2017), as
well as the increasing transfer pricing documentation
requirements covering all types of intra-group operations
(effective 1 January 2015) have brought the need for preparing transfer pricing documentation into the limelight of
the Luxembourg tax environment.

Across the globe and within the
EU, BEPS has already imposed
increased transparency and updated
definitions and has introduced
deadlines on both MNEs and
governments.

/ AUG / SEP 2017

MNEs operating in Luxembourg are directly impacted
by the CbCR requirements, as the government endorsed
related legislation last year (effective 1 December 2016).
As the first step of notifying the Luxembourg tax authorities about the CbCR submission has already been taken
by many Luxembourg companies, Luxembourg MNEs are
now expected to focus on identifying and adjusting potential weaknesses before the first actual reporting deadline
(i.e. 31 December 2017).

- JULY

Respondents to the Survey appear to have made little
progress in the area of CbCR, with 45% of the MNEs still
in the modelling phase of the figures to be included in the
reporting and 22% not having taken any action. Since tax
authorities globally will use CbCR as a tool to target their
audits, the need to involve transfer pricing professionals
is expected to increase in this area.

N°98

This trend is broadly followed by MNEs operating in
Luxembourg, with banks and wealth management companies being increasingly focused on their compliance
with the changing transfer pricing requirements and the
expectations of tax authorities as regards their intragroup activities.

Country by country reporting ("CbCR")
considerations

-

As regards industry variance, financial services (banking,
capital markets and wealth management) represent
the sector that is most prepared in terms of a complete
alignment of documentation, with 29% of respondents
in this sector reporting that all their transfer pricing
documentation is now in line with BEPS requirements for
all transactions. For the insurance sector, only 14% of the
respondents indicated BEPS-aligned documentation for
all their transactions, although 67% have it prepared for
key transactions.

OANA POPESCU
Transfer Pricing Manager
EY LUXEMBOURG

Anticipation of BEPS related controversy
Considering the changing landscape, as well as the increasing amount of information to be collected by the tax
authorities, there are likely to be increasing incidences
of tax controversy. Two topics seemed to be of particular
concern among the respondents: (i) the PE related impact
of Action 7 - Preventing the artificial avoidance of PE status and (ii) the closer focus on intra-group financing introduced by BEPS Action 4 - Limiting Base Erosion involving
interest deductions and other financial payments, as well
as Actions 8-10 - Aligning transfer pricing outcome with
value creation.
Since Action 7 modifies the threshold under which a
corporate presence can be regarded as a PE, MNEs would
need to take a closer look at their approach towards their
taxable/non-taxable presence. Currently, 20% of the Survey respondents have stated that they have a comprehensive understanding on how Action 7 will practically impact
their business while 15% have no awareness whatsoever,
suggesting there is a lack of knowledge on how to prevent
a PE being assessed.

LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE

NICOLAS GILLET
Transfer Pricing Partner
EY LUXEMBOURG

31
Trésorier/Treasurer magazine - N°98 - July/Aug/Sep 2017

Table of Contents for the Digital Edition of Trésorier/Treasurer magazine - N°98 - July/Aug/Sep 2017
