New rules for intra-group financing

In a few words

The new rules follow OECD transfer pricing guidelines and set out the methodology that must be applied to determine “arm’s length” prices.

On December 27^th 2016, the head of the Luxembourg tax authorities issued circular L.I.R. n° 56/1 – 56bis/1 relating to the tax treatment and more specifically the transfer pricing aspects of companies engaged in intra-group financing transactions (the “Circular”). The Circular was issued further to the introduction in the Luxembourg tax code of a new article which outlines the transfer pricing rules applicable to “controlled transactions” (“Article 56 bis LIR”). The provisions of Article 56 bis LIR are inspired by the OECD Transfer Pricing Guidelines and set out the methodology that must be applied to determine “arm’s length” prices.

With effect as from January 1^st 2017, the Circular replaces the two previous circulars L.I.R. n° 164/2 dated January 28^th 2011 and n°164/2bis dated April 8^th 2011 on the same topic.

The main changes introduced by the Circular are the following…

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