Transcript Document

Luxembourg – Tax news
Chamber of Tax Consultants
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1. Basics of Luxembourg tax law
Corporations
Thin capitalisation
 Concept of related parties in Luxembourg
 15% equity / 85% debt (arm’s lenght ratio applied by tax administration)
 If not respected, excessive interest payments may be requalified as
dividends (15% WHT) and are not deductible
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2. Basic holding structures
85/15 structure
Dividends
Interest
Investor
 Adapted to Luxembourg thin cap
requirements
 85% interest bearing loans
 15% equity / interest free loans
15%
Equity & IFL
85% IBL
Lux HoldCo
 No WHT on interest payments
 15% WHT on dividends (may be
reduced under applicable DTC)
 Suitable when low annual returns
Target
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3. The double holding structure
Profit extraction
Investor
At the level of SubHoldCo
Interest
 99% via PPL (no WHT / tax deductible)
100% of the
profits minus
annual spread
Dividends
 Remaining 1% = taxable (at 28.80%)
 And distributed via dividends (no WHT)
Lux HoldCo
At the level of HoldCo
 100% via FTL (no WHT / tax deductible)
Interest
 Minus annual taxable spread (at 28.80%)
Dividends
99% of the
profits
 Rest via Dividends (15% WHT)
Lux SubHoldCo
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5. The new circulars
Circular 164/2 – 28 January 2011
Scope
Most important changes
Length of validity
Transfer pricing report
Substance
Equity
Circular 164/2 bis – 8 April 2011
Actions required?
Greater substance => greater security for
the tax payer
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Questions?
[email protected]
Tel : +7 495 662 65 43
www.allenovery.com
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