Following the long winter hibernation, the end of March was hectic with a series of new tax measures. In March, France and Luxembourg signed a new Double Tax Treaty ("DTT"). This DTT largely follows the 2017 OECD Model Tax Convention. The DTT has significant implications for Luxembourg funds investing in real estate in France and for French cross-border workers. In this edition of ATOZ Insights, we summarise the consequences of this new DTT.
On 22 March, the draft law introducing the new BEPS-compliant Intellectual Property ("IP") regime was passed by the Luxembourg Parliament. The regime will apply retroactively as from tax year 2018, meaning that Luxembourg taxpayers will be able to immediately benefit from an 80% exemption regime applicable to income related to patents and copyrighted software. In addition, IP assets which qualify for the 80% (corporate) income tax exemption will be 100% exempt from net wealth tax. We have analysed the tax provisions of the new IP law in detail.
A third and final Luxembourg focused article in this issue summarises the consequences of the new, updated AML Law. The Law of 13 February 2018, which entered into force on 18 February 2018, substantially modifies the amended law of 12 November 2004 relating to the fight against money-laundering and against the financing of terrorism.
At a European level, the European Finance Ministers reached, on 13 March 2018, a political agreement on the Proposal for a Council Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. According to this proposed Directive, often known as the proposed Directive on Administrative Cooperation VI or "DAC VI", intermediaries, broadly defined, or taxpayers, will have to report any cross-border transaction which meets certain conditions (i.e. main benefit test and/or hallmarks) to the local tax authorities for further exchange with other tax authorities. We have analysed the possible impacts of DAC VI.
Furthermore, on 21 March, the European Commission issued two directive proposals aiming to ensure that tax laws "fairly" tax digital business activities. The first proposal aims at reforming the EU's corporate tax rules for digital activities. The second one aims at introducing an interim tax on certain revenue from digital activities. We explain the main changes that these proposals would introduce.
On the tax litigation front, at the end of 2017, the Court of Justice of the European Union (''CJEU'') decided on two cases involving German anti-abuse legislation that denied a (partial) exemption or refund of withholding tax on distributions made by German companies to foreign parent companies. This case law confirmed the Court's previous jurisprudence, and is expected to have a significant impact on anti-abuse provisions in place in several European countries. Our article provides an overview of the limitations set by the CJEU on the scope of antiabuse legislation in an EU context.
From a regulatory point of view, on 12 March 2018, the European Commission issued a series of legislative proposals to amend the existing legal framework for the cross-border distribution of investment funds in the EU. These Proposals aim at modifying the AIFM and UCITS Directives as well as introducing a regulation to standardise the requirements for cross-border distribution of both AIFs and UCITS in the EU. In our article, we give details on what we think the Commission got right and where we feel improvements can still be made.
Lastly, in our final article, we analyse what Brexit means from an indirect tax perspective. The UK should, in principle, not be subject to European legislations as from 30 March 2019, the date from which the UK will become a "third country" for the European entities. This major change will have significant indirect tax consequences.
We hope you enjoy these insights.
Download >> ATOZ Insights - May 2018
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