Defensive measures for EU list of non-cooperative countries and territories

Luxembourg tax authorities just published defensive measures in relation to the EU list of non-cooperative countries and territories for corporate tax purposes

As part of its external taxation strategy, the European Union is promoting tax good governance on a global level through tax transparency, fair taxation and implementation of new standards. Last December, the Council of the European Union approved and published conclusions containing the European Union list of non-cooperative jurisdictions. The listed jurisdictions have been considered as not yet having provided effective actions in response to the European Union concerns.

The current listed jurisdictions are American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago and US Virgin Islands. The Council of the European Union will update the list at least once per year, the last update dating 16 March 2018.

On 8 May 2018, the Luxembourg direct tax authorities published through a circular (only in French) the defensive measures in connection with the European list. They intend to examine very closely the transactions of Luxembourg companies with related entities situated in the listed jurisdictions. Consequently, the Luxembourg direct tax authorities will carry out an enhanced monitoring of such transactions.

In this context, they will require companies to list in their Luxembourg tax returns all transactions with related entities located in listed jurisdictions. The tax authorities indicated that the applicable version of the EU list to be taken into account is the one released at the time of the financial year-end of the concerned Luxembourg companies. This reporting will be reflected for first time in the Luxembourg tax returns to be filed in 2019 covering fiscal year 2018.

Additionally, as part of the review of tax returns and/or a subsequent investigation, the Luxembourg tax authorities can request the concerned companies to provide them the details of those transactions, including the total amount and the statement of income and expenses, as well as the statement of claims and debts owed to such enterprises.