Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 22

FORUM
IMPLEMENTATION
OF EU TAX RULES

LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE	-	
MAGAZINE
-
N°99 - NOV /

DEC / JAN 2018

Impact of the BEPS on tax liability:
A practical approach
On October 2015, the OECD published a plan composed of 15 actions
which aim at countering "Base Erosion and Profit Shifting" ("BEPS").
This action plan has been endorsed by more than 100 countries and
contains a set of recommendations and minimum standards to be
followed by participating states. BEPS actions are expected to have a
strong impact on the taxation of companies, and have already started
to be implemented. While some measures focus on transparency
(e.g., exchange of information), other should directly impact taxes due
by companies.

BEPS actions are expected to have

- An interest deduction limitation rule;
- An exit tax rule;
- A controlled foreign company ("CFC")
rule;
- A general anti-abuse rule;
- An anti-hybrid rule.

therefore, on the taxes paid by those
companies.

In parallel, in July 2016, the European
Union adopted the Anti-tax avoidance
directive ("ATAD"), which directly implements some of the BEPS actions within
European Union law. More recently,
BEPS action 15 led to the adoption of
the Multilateral Convention to Implement Tax Treaty Related Measures to
Prevent Base Erosion and Profit Shifting
("MLI") signed last June by 68 countries.

1. The ATAD
On 12 July 2016, the Economic and Financial Affairs Council of the European
Union (ECOFIN) formally adopted the
ATAD. Luxembourg has to implement
the provisions of the directive in domestic law before 1st January 20191 . The
ATAD contains 5 measures which might
have a direct cash impact on the tax
liability of a company:

1

22

The general philosophy behind the
general anti-abuse rule is to ensure
that transactions carried out by the
taxpayer follow a genuine business
purpose, otherwise the transactions
may be disregarded by tax authorities
that consider those transactions to
be carried out for tax reasons. The
anti-hybrid rule tackles hybrid entities
and hybrid financing instruments, and
may have a direct impact on the taxable
base of Luxembourg companies (via
income that would no longer be exempt
or via expenses that would no longer
be tax deductible) and, potentially

Some other ATAD provisions are however subject to a different implementation date.

a strong impact on the taxation of
companies, and have already started
to be implemented.

The exit tax rule is not expected to
have a significant impact on the tax
liability of Luxembourg companies as
Luxembourg domestic tax law already
contains similar provisions.
The two last rules are expected to have
a significant impact on the taxes due by
Luxembourg companies. According to
the interest deduction limitation rule,
taxpayers should not be able to deduct
the net borrowing costs which exceed
30% of their earnings before interest,
tax, depreciation and amortization
("EBITDA").
Table des matières de la publication Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018
