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Transparency Urged From Luxembourg On Fiscal Policies

by Ulrika Lomas, Lowtax.net, Brussels
27 March, 2014

The European Commission has called on Luxembourg to submit information that the Commission needs in order to assess whether certain tax practices favor certain companies, which would potentially breach European Union state aid rules.

As Luxembourg failed to adequately answer previous requests for information, the Commission has now adopted two information injunctions ordering Luxembourg to deliver the requested information within one month. Should Luxembourg persist in its refusal, the Commission may refer the issue to the EU Court of Justice.

The European Commission is currently gathering information on both tax ruling practices (i.e. decisions for individual companies on specific tax matters) as well as intellectual property (IP) tax regimes in member states, to assess their compliance with EU state aid rules. For this purpose, it sent information requests to several member states, including Luxembourg. According to the Commission, in both inquiries, Luxembourg refused to respond fully to the requests, invoking fiscal secrecy:

  • Regarding its tax ruling system, Luxembourg only provided general information but failed to provide a specific overview of rulings it made in 2011 and 2012;
  • Luxembourg also refused to deliver certain information on the usage of the IP tax regime, including the details of the 100 largest companies falling under the regime. The Luxembourg regime was introduced in 2008 and allows for tax exemption of 80 percent of profits derived from the use or licencing of IP rights such as patents, trademarks, designs, models, internet domain names, and software copyrights.

In response, the Luxembourg Government has stated:

"Since the summer of 2013, Luxembourg has had a continued and extensive exchange with the European Commission regarding the Commission's request for information on Luxembourg's intellectual property regime as well on its advanced tax decisions which give individual companies the comfort of advanced knowledge of their tax burden."

"As it has just received the two injunctions announced earlier today by the Commission, Luxembourg will now duly examine whether these injunctions dissipate the doubts Luxembourg has had so far regarding the legality of the Commission's request. Luxembourg remains committed to fully cooperate with the Commission within the cooperative mechanisms foreseen by EU law."

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