Are there possibilities in Luxembourg to circumvent the internationally agreed minimum tax rules? This is the question asked by LSAP MP Franz Fayot to CSV Minister of Finance, Gilles Roth.
“In an assessment published on November 26, 2024, the European Commission expresses particular concerns regarding the lack of withholding tax on dividend, interest and royalty payments to low-tax jurisdictions, a mechanism that could facilitate tax evasion and reduce tax revenues of Member States,” underlines the former Minister of the Economy.
Furthermore, the Commission had already noted last June that the implementation of Pillar 2 by Luxembourg, “although a step in the right direction”, would “only partially” resolve the problem of outgoing payments, because it limits to large multinationals and “excludes certain sectors”, he continues. Remember that Pillar 2 is one of the two pillars of the international tax reform plan planned by the OECD and the G20. With 139 member countries, Pillar 2 aims to establish a global minimum tax (IMM) of 15% on the income of large multinational enterprises (MNEs), whose global turnover is at least €750 million.
“This approach could continue to leave possibilities for circumventing the minimum tax rules agreed at the international level,” notes the MP. This criticism highlights practices that could harm Luxembourg’s reputation.”
In response, Gilles Roth indicates that Luxembourg has already deployed in 2021 a measure of non-deductibility of interest and royalties for non-cooperative jurisdictions in tax matters, included on the European Union list. “This defensive measure aims precisely to combat the problem of outgoing payments as identified by the European Commission and is also likely to apply against low-tax jurisdictions,” explains the minister.
Regarding the impact of Pillar 2 on the aggressive tax planning practices of business groups, the European Commission itself indicates in its assessment of June 19, 2024 that the implementation of Pillar 2 by Luxembourg “will contribute to solve the problem of outgoing payments,” adds Gilles Roth. In the Grand Duchy, the 15% taxation of multinationals is changing the daily lives of businesses, but the impact has not yet been measured.
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