Luxembourg 2020 Budget To Apply Automatic Expiration Of Pre-2015 Tax Rulings

October 17, 2019by TPA Global

The 2020 Budget Bill of Law provides filed by the parliament provides for the automatic expiration of pre-2015 tax rulings upon completion of the fiscal year 2019. The bill also provides that affected taxpayers may request a new ruling (valid for five years) under the current procedure.

Prior to the submission of the proposed law, these tax rulings often do not mention a determined validity period, meaning that Luxembourg tax authorities are in principle bound for an unlimited period, insofar as the tax rulings are still in line with the law. Since tax rulings granted after 1 January 2015 are valid for a maximum period of five tax years, there is a discrepancy between the validity period in relation to rulings issued under the old procedure compared to the period for rulings under the new procedure.

The Bill of Law indirectly confirms that taxpayers should still be able to rely on their pre-2015 tax rulings for the tax years up to 2019, to the extent they did not expire out of their own right. In practice, the benefits of the older advance tax confirmations will also usually be limited by now anyway, because they only gave protection as long as they complied with national, EU and international law, which has generally changed significantly in the intervening period.

Should the taxpayer want similar comfort for subsequent tax years, a new request may be filed under the current procedure. The proposed explicit language to that effect, referring to the formal procedure, seems to imply that the fact that a renewed ruling request would be filed only long after the transaction had occurred, is not an is worth noting that the bill appears to permit new advance tax confirmations (tax ruling) for these older, existing transactions.  However, it may be that older structures and transactions are no longer tax-effective given the way in which they would be treated in a new advance tax confirmation, as a result of the developments in Luxembourg and international tax law since the initial granting of the advance tax confirmation.

Any request for a new tax ruling should be submitted to the head of the taxation office, after which the applicant will be informed of the appropriate fee that has been determined and may be invited to present the application orally to the Commission of tax ruling once the fee has been paid.  The Commission, which will also have received the written application, will then pass its advice to the head of the taxation office who would issue the tax ruling.

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