Luxembourg's New Transfer Pricing Rules: Some Compliance Required!

On 22 December 2016 the Luxembourg Parliament passed article 56bis of the Luxembourg Income Tax Law (LITL). This provision gives taxpayers and tax authorities more guidance on how to apply the arm's-length principle. The new article can be seen as a transposition of OECD BEPS reports (actions 8-9-10) released in late 2015 into national law.

Par. 7 of Art 56bis¹ will affect future transfer pricing work because taxpayers must now be prepared to be able to document the commercial rationale behind intercompany transactions as part of transfer pricing documentation. Attention will need to be paid to this in pre-structuring documentation. Therefore, a description of the Luxembourg value chain should take any non-tax reasons into account.