Following the publication by the ICIJ consortium of over 500 advance tax decisions ("rulings") issued by the Luxembourg tax administration between 2002 and 2010, the Luxembourg Ministry of Finance would like to provide further clarifications.
The practice of advance tax decisions is well established in many countries, including Luxembourg.
In these decisions, the tax administration sets out how it intends to apply the existing national and international tax rules to a specific situation.
The European Commission has confirmed that this practice is not in conflict with European law, provided that all taxpayers in a similar situation are treated equally.
The advance tax decisions issued by the Luxembourg tax administration are compliant with national, European and international law. Their legality is not contested.
The interaction of the tax regimes of multiple countries, within the current international framework, can lead to a significant reduction of the tax burden of multinational companies. The analysis of this situation calls for a broad perspective, and cannot be limited to one country's regulatory framework.
Since the financial and economic crisis, states and citizens take a fresh look at international taxation matters. The legitimacy of certain mechanisms, which are compliant with international law, is put in doubt.
Luxembourg shares those concerns. In particular, Luxembourg believes that it is not acceptable that companies take advantage of the international legal framework to avoid de facto all taxation.
The relevant international rules need to be adapted to today's realities. This requires a coordinated effort by the international community.
The Luxembourg government has taken a strong position in favor of transparency in fiscal matters. Luxembourg is an active and positive player in the discussions at OCDE and EU level, which aim at achieving greater fairness in international tax matters.
At the national level, the government has submitted to parliament, in early october 2014, a draft law which provides an enhanced framework and greater transparency with regard to advance tax decisions.
On a European level, Luxembourg has supported, in july 2014, the addition of new provisions to the parent-subsidiary directive, which aim at preventing the double non taxation of companies through hybrid mismatches. Luxembourg also supports the introduction into this directive of a generalized anti-abuse clause.
Over the course of the last few months, Luxembourg has taken clear steps in favor of the adoption of the automatic exchange of information in tax matters as the new global standard. As of 2015, Luxembourg will apply the automatic exchange of information based on the EU savings directive. Luxembourg will count among the Early Adopters of the OCDE Common Reporting Standard for Automatic Exchange of Financial Account Information, starting in 2017.
Communiqué par le ministère des Finances