The Luxembourg tax authorities published on 8 April 2011 a circular (LIR n° 164/2Bbis, the “Circular”) aiming at completing the transfer pricing circular issued on 28 January 2011 (L.I.R. n° 164/2) related to the tax treatment of intra-group financing transactions at the level of affiliated companies.
The Circular provides that the advance tax agreements obtained by such financing companies before the entry into force of circular L.I.R n° 164/2, that is to say on 28 January 2011, will no longer be binding on the tax authorities as from 1st January 2012.
Therefore, financing companies wishing to obtain a new advance tax agreement will have to request it from the relevant tax services, which shall take position in accordance with the rules set forth by circular L.I.R. n° 164/2
The issuance of the Circular represents a great step in the Luxembourg quest for tax transparency. No doubt that the application of these guidelines will make safer the Luxembourg financial structures.