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Luxembourg's Tax Rulings Discussed By New EU Commissioner

by Ulrika Lomas, Tax-News.com, Brussels

10 November 2014


The European Commission has not yet formed an opinion on two contested tax rulings provided by the Luxembourg Government to multinational companies, and it has yet to formally respond to the recent leak of previous rulings, the new Competition Commissioner has said.

Margrethe Vestager said: "Tax rulings as such are common practice in member states. However, if in a tax ruling, the tax authorities of a member state accept that a tax base of a specific company is calculated in a favorable way which does not correspond to market conditions, it may give to the company a more favorable treatment than what other companies would normally get under the country's tax rules, and this could constitute State aid."

Margrethe Vestager's comments came in a statement that followed the leaked publication by the International Consortium of Investigative Journalists (ICIJ) of more than 500 advance tax decisions issued by the Luxembourg tax authorities between 2002 and 2010.

Vestager said that the Commission had "not seen all the information published," but was working "in close cooperation with the Luxembourg authorities" as part of ongoing investigations into the rulings handed down to Amazon and Fiat Finance and Trade.

Stating that she was unable to discuss the ongoing individual investigations, she disclosed that the Commission had "at this stage not yet formed an opinion about [the leaked] rulings and a possible formal follow-up by the Commission."

Concluding, Vestager said that the Commission "will be vigilant to enforce state aid control in [a] fair and justified manner."

Reacting to the ICIJ leak, the Luxembourg Finance Ministry said: "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."

The Ministry also highlighted Luxembourg's role as "an active and positive player" in base erosion and profit shifting (BEPS) discussions, both at the European Union- and Organisation for Economic Cooperation and Development-level.

Last month, the Government tabled draft legislation to enhance the transparency of its tax rulings system. From 2015, Luxembourg will engage in the automatic exchange of information, as provided for by recent reforms to the EU's Savings Directive, and will be among the "early adopters" of the OECD's Common Reporting Standard from 2017.

TAGS: compliance | Finance | tax | European Commission | tax compliance | tax avoidance | tax incentives | law | Organisation for Economic Co-operation and Development (OECD) | corporation tax | Luxembourg | ministry of finance | tax authority | legislation | tax planning | transfer pricing | advance pricing agreement (APA) | tax rates | tax reform | European Union (EU) | Europe | Invest

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