New Luxembourg Circular on TP for intra-group finance
The Luxembourg Tax authorities have launched a new Circular (LIR 56/1-56bis) that introduces very strict rules on intra-group financing effective 1 January 2017. All existing transfer pricing rulings related to intercompany financing are no longer valid as from 1 January 2017 and functional analysis should be done to determine the correct equity level covering the functions, assets and risks of the transacting parties and their commercial relationship. In addition, the new rules express adequate substance:
-Majority of the board of directors should be Luxembourg residents
-The company should employ qualified personnel to manage and control the transactions
If these new rules are not met the tax authorities would exchange that information with other countries' tax authorities.