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On December 19, 2024, the Luxembourg Parliament approved Bill No.8396 which amends the Luxembourg Global Minimum Tax Law (Law A864 which transposes the Pillar 2 rules as provided in the EU Minimum Tax Directive). The amendments apply for Fiscal Years ending on or after December 31, 2023.
This follow the original draft law issued on June 12, 2024, (draft law amending the law of 22 December 2023 on the minimum effective taxation for multinational enterprise groups and large domestic groups) which provided for a number of amendments in the February 2023, July 2023 and December 2023 OECD Administrative Guidance. On October 31, 2024 additional amendments were made to the draft legislation to incorporate elements from the June 2024 OECD Administrative Guidance, which will also have an impact on the application of Luxembourg’s QDMTT.
QDMTT Amendments
The amendments that impact on the QDMTT include:
(1) Article 44(5) of the Law excludes taxes incurred by CFC’s, Hybrids (as provided in the July 2023 OECD Administrative Guidance) and taxes on distributions (aside from domestic withholding tax). The December 2024 Amendment Law also extends the restriction to Reverse Hybrids as stated in Article 5.6.2 of the June 2024 OECD Administrative Guidance.
(2) Article 44(6) of the Law provides that instead of using the UPEs accounting standard, MNEs calculate GloBE income for QDMTT purposes using Luxembourg Accounting Standards or IFRS.
Article 11 of the December 2024 Amendment Law provides that the IFRS to be used in the event that several admissible financial accounting standards applicable in Luxembourg are used by the Constituent Entities of the Group, is the IFRS as adopted by the European Union in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards.
(3) Article 11 of the December 2024 Amendment Law provides that where all the Constituent Entities in the jurisdiction use Luxembourg GAAP and the euro as their functional currency, the QDMTT requires the relevant computations in euros.
However, if not all Constituent Entities in the jurisdiction use euros as their functional currency, the Filing Constituent Entity may make a Five-Year Election to undertake the QDMTT computations for all Constituent Entities in the jurisdiction either:
– in the presentation currency of the Consolidated Financial Statements; or
– in euros.
(4) Article 11 of the December 2024 Amendment Law applies the initial phase of international activity exemption for QDMTT purposes.
(5) The June 2024 OECD Administrative Guidance provides various options to jurisdictions that have implemented a QDMTT in respect of securitisation vehicles:
(i) application of the jurisdiction’s QDMTT to securitisation vehicles without any specific adjustment of the rules;
(ii) exclusion of securitisation vehicles from the scope of the QDMTT; or
(iii) inclusion of securitisation vehicles in the scope of the QDMTT while providing that the amount of QDMTT that has been determined for a securitisation vehicle is imposed on another Constituent Entity located in the same jurisdiction and forming part of the same MNE Group.
Article 12(3) of the December 2024 Amendment Law applies option (iii). However, if there are no other constituent entities located in Luxembourg, the amount of QDMTT for a securitisation vehicle is allocated for the purposes of the payment of the QDMTT to the securitisation vehicle itself.
Amendments for the OECD Administrative Guidance
The amendments are comprehensive and will ensure Luxembourg’s Global Minimum Tax Law now includes most aspects of the OECD Administrative Guidance issued to date, although some of the amendments are subject to further Grand Ducal Regulations.
The table below shows the principal amendments to the Global Minimum Tax Law, including the relevant provisions in the amending law and the OECD Administrative Guidance:
| First Set of OECD Administrative Guidance | ||
| 1.1 | Rebasing monetary thresholds in the GloBE Rules | Regulation to be issued |
| 1.4 | Sovereign wealth funds and the definition of Ultimate Parent Entity | Art 1 ter |
| 1.6 | Meaning of ancillary for Non-Profit Organisations | Art 1 ter |
| 2.1 | Intra-group transactions accounted at cost | Art 9 |
| 3.3 | Restricted Tier 1 Capital | Art 4(2) |
| 3.4 | Liabilities related to Excluded Dividends and Excluded Equity Gain or Loss from securities held on behalf of policyholders | Art 4 |
| 3.6 | Application of Tax transparency election to Mutual insurance companies | Art 10 |
| 4.1 | Deferred tax assets with respect to tax credits under Article 9.1.1 | Art 15(1) |
| 4.2 | Applicability of Article 9.1.3 to transactions similar to asset transfers | Art 15(2) |
| 4.3 | Asset carrying value and deferred taxes under 9.1.3 | Art 15(2) |
| Second Set of OECD Administrative Guidance | ||
| 1 | Currency conversion rules | Art 11(3) |
| 3 | SBIE- Leases | Art 8 |
| Third Set of OECD Administrative Guidance | ||
| 1 | Transitional CbCR – Purchase Accounting Adjustments (consistent reporting condition, goodwill impairment adjustment) | Art 18(1) |
| 2.2.1 | Transitional CbCR – JVs | Art 18(4) |
| 2.3.1 | Transitional CbCR – Same Financial Statements/Local Financial Statements for Statutory Reporting | Art 18(3) |
| 2.3.2 | Transitional CbCR – Using different accounting standards | Art 18(3) |
| 2.3.3 | Transitional CbCR – Adjustments to Qualified Financial Statements/Dividend Mismatches | Art 18(3) |
| 2.3.4 | Transitional CbCR – MNEs not required to file CbC Reports | Art 18(3) |
| 2.3.5 | Transitional CbCR – Qualified Financial Statements for PEs | Art 18(3) |
| 2.4.2 | Transitional CbCR – Treatment of Taxes on income of PEs, CFCs, and Hybrid Entities | Art 18(3) |
| 2.6 | Transitional CbCR – Treatment of hybrid arbitrage arrangements | Art 18(5) |
| 3.1 | Identifying Consolidated Revenue | Art 1 ter |
| 3.2 | Mismatch between Fiscal Years of the UPE and another Constituent Entity | Art 2(1) |
| 3.3 | Mismatch between Fiscal Year and Tax Year of Constituent Entity | Art 2(1) |
| 4.2.1 | Blended CFCs -Â multiple GloBE Jurisdictional ETRs | Art 17 |
| 4.2.2 | Blended CFCs – not required to calculate an ETR | Art 17 |
| 4.2.3 | Blended CFCs – income of non-GloBE Entities | Art 17 |
| 5.3 | 30 June 2026 Filing deadline | Art 16 |
| Fourth Set of OECD Administrative Guidance | ||
| 1.2.1 | Aggregate DTL Category basis | Art 6(2) – subject to regulation |
| 1.2.1 | Exclusion of certain types of GL accounts and separate tracking | Art 6(2) – subject to regulation |
| 1.2.1 | Exclusion of GL accounts that generate standalone DTAs | Art 6(2) – subject to regulation |
| 1.2.1 | Exclusion of swinging accounts and separate tracking | Art 6(2) – subject to regulation |
| 1.2.2 | FIFO/LIFO Basis | Art 6(2) – subject to regulation |
| 1.2.3 | Aggregation of Short-term DTLs | Art 6(2) – subject to regulation |
| 1.2.2 | Reversal of DTLs that accrued before the Transition Year | Art 6(2) – subject to regulation |
| 1.2.2 | 5 year unclaimed accrual election | Art 6(2) – subject to regulation |
| 2.1.2 | Recalculated deferred tax where GloBE carrying value differs from accounting carrying value | Art 6(2) – subject to regulation |
| 2.1.2 | GloBE and accounting carrying values and the Transition Rules | Art 6(2) – subject to regulation |
| 2.1.2 | Additional provisions for Intragroup transactions accounted for at cost | Art 6(2) – subject to regulation |
| 2.1.2 | Exclusion of GloBE carrying value from SBIE | Art 6(2) – subject to regulation |
| 3.1.3 | General rules for allocating cross-border, current taxes under a cross-crediting corporate tax system: 4 Steps | Art 6(2) – subject to regulation |
| 3.1.3 | Specific rules for foreign PEs/CFCs, Hybrids/rev hybrids with domestic source income | Art 6(2) – subject to regulation |
| 3.1.3 | Cross-crediting between Permanent Establishments and distributions from foreign subsidiaries | Art 6(2) – subject to regulation |
| 4.1 | Extension of the Substitute Loss Carry-forward DTA to PEs, hybrids and rev hybrids | Art 6(2) – subject to regulation |
| 4.2 | Allocation of deferred tax expenses and benefits from a Parent Entity to a CFC, PE Hybrid or Rev Hybrid: 5 step process | Art 6(2) – subject to regulation |
| 4.2.2 | Five-Year Election to exclude the allocation of all deferred tax expenses and benefits to CFCs, PEs, Hybrids and Rev Hybrids | Art 6(2) – subject to regulation |
| 4.2.3 | Exclusion of deferred tax assets or liabilities arising under a Blended CFC regime from transition rules | Art 6(2) – subject to regulation |
| 5.2.2 | Determining GloBE status when a Flow-through Entity is held directly by another Flow-through Entity | Art 2(2) |
| 5.3.2 | Non-group owners: Partially owned Flow-through Entities | Art 19 |
| 5.3.5 | Non-group owners: Indirect minority ownership | Art 20 |
| 5.4.2 | Taxes allocated to a flow-through entity | Art 7(1) |
| 5.5.2 | Hybrid entities – Taxes pushed down include indirect owners | Art 7(2) |
| 5.5.4 | Hybrid entities – Entities located in jurisdictions without a Corporate Income Tax system | Art 7(2) |
| 5.6.2 | Extension of taxes pushed down to include Reverse Hybrids | Art 7(2) |
| 6.1.4 | Option to not impose top-up tax liabilities on SPVs used in securitization transactions | Art 12 |
| 6.1.4 | New definition: Securitization Entity | Art 2(4) |
| 6.1.4 | New definition: Securitization Arrangement | Art 2(4) |
For detailed information on the application of the GloBE Rules in Luxembourg, based on the latest law, see our:
Luxembourg: GloBE Country Guide
OECD Administrative Guidance: Domestic Implementation Matrix
Transitional CbCR Safe Harbour: Domestic Implementation Matrix
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