Lux­em­bourg to sharpen cor­po­rate tax rules

Kuwait Times - - BUSINESS -

Lux­em­bourg yesterday said it would sharpen its cor­po­rate tax rules, mak­ing it more dif­fi­cult for large cor­po­ra­tions to avoid tax by chan­nelling funds through the small Euro­pean coun­try, a prac­tice ex­posed in media re­ports known as “LuxLeaks”.

The rules, en­ter­ing into force on Jan 1, firm up the “arm’s length prin­ci­ple”, mean­ing fi­nanc­ing be­tween dif­fer­ent units of the same com­pany should be car­ried out as if they were un­re­lated firms.

Tax rul­ings made be­fore the new law en­ters into force will no ap­ply af­ter the 2016 tax year, Lux­em­bourg’s tax au­thor­i­ties said. Tax rul­ings by which of­fi­cials as­sured multi­na­tion­als of ad­van­ta­geous treat­ment of funds mov­ing through Lux­em­bourg, cre­ated ou­trage in 2014 when the “LuxLeaks” re­ports un­veiled how such deals were bro­kered for global com­pa­nies. Those re­ports over­shad­owed the start of Jean-Claude Juncker’s term as EU Com­mis­sion Pres­i­dent, as he was Lux­em­bourg’s Prime Min­is­ter for al­most two decades be­fore tak­ing of­fice in Brus­sels.

The Euro­pean Com­mis­sion, which en­forces com­pe­ti­tion rules in the Euro­pean Union, wel­comed the new rules but would not say how they would af­fect its on­go­ing in­ves­ti­ga­tions. “The gen­eral, for­ward-look­ing change of ap­proach an­nounced by Lux­em­bourg is very wel­come,” Com­mis­sioner Mar­grethe Vestager said in a state­ment.

Last year, the Com­mis­sion or­dered Lux­em­bourg to re­cover 20 to 30 mil­lion euros ($21-$31 mil­lion) from Italy’s Fiat , say­ing the car­maker had ben­e­fited from il­le­gal tax deals with the Grand Duchy. — Reuters

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