Mutual Agreement Procedure Luxembourg

In practice, the mutual agreement procedure is particularly relevant to subjects who are involved in transfer pricing or the taxation of stable institutions. It allows tax payers to obtain a tax adjustment in two jurisdictions at the same time. In the future, the use of the mutual agreement procedure may be more frequent, particularly with the introduction by the multilateral instrument (“MLI”) of the “general interest test” in double taxation conventions, which covers issues relating to the basis and reports on profit transfers. Historically, domestic tax remedies have been seen as the first approach to resolving international tax or transfer pricing disputes. Taxpayers have often initiated mutual agreement (POP) procedures to resolve a dispute and ensure security. The POP essentially offered a dispute resolution mechanism between the public authorities (amicable procedure), with the competent authorities striving to settle disputes relating to tax contracts on a consensual basis. The Luxembourg Direct Tax Authorities issued guidelines (Circular LG Conv) on 28 August 2017. DI No 60), which define the mechanism for implementing the Mutual Agreement Procedure (POP) in Luxembourg tax treaties. Today, more than 135 countries have implemented the recommendations of the BePS (Base Erosion and Profit Shifting) project, which aims to improve this process. As a result, the MultiLATERALe BePS (MLI) instrument is available. However, the MLI only applies to tax treaties concluded with other legal systems that have ratified the LML and which also include this treaty in their list of covered tax treaties. In addition, contracting states may express reservations when the MLI is adopted.

Unlike the IMLI, Luxembourg law provides a single framework for resolving tax disputes when other EU Member States are involved. Compared to the EU Arbitration Convention, the new framework is seen as more effective, particularly in terms of access to POPs, the duration of the procedure and the time it takes to complete it. Dispute resolution: audit defence and mutual agreement/competent authority (MAP/CA) procedures have been saved In practice, the request for a MAP must be addressed to one of the three subdivisions of the Luxembourg Domestic Revenue Directorate: the “executive committee” for all mutual agreement procedures, the “economic department” for transfer pricing issues and the department of international relations for all other matters. The competent authority on discrimination depends on the nationality of the subject.

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