The Luxembourg tax authority is the first to officially announce sanctions against jurisdictions designated by the European Union as ‘non-cooperative’ for tax purposes.
Under Circular LG-A no.64, Luxembourg resident companies must state in their tax return if they have entered into transactions with ‘related enterprises’ in jurisdictions included on the EU blacklist, starting from the 2018 tax year.
The term ‘related enterprise’ refers to an enterprise that participates directly or indirectly in the management, control or capital of another enterprise; or where the same individuals participate directly or indirectly in the management, control or capital of two enterprises.
Details of related enterprise transactions must be provided to the tax authorities on request, including the transaction value, income and expenses linked to the transaction, and the detail of receivables and debts towards the related enterprise.
The circular states that the tax authority will apply ‘reinforced control’ to companies that rely on tax structures or arrangements involving non-cooperative jurisdictions for tax purposes that are included in the EU blacklist.
The new disclosure requirement will be based on the EU blacklist as it stood at the end of the relevant financial year. For 2018, this means only American Samoa, Guam, Samoa, Trinidad and Tobago and the US Virgin Islands. Ten more jurisdictions have been added since then, although three of them were later removed.