In a post-BEPS world, where the location of profits needs to be aligned with the value creation, substance is a key aspect.

Every Luxembourg company having cross-border operations should consider whether it has the appropriate substance from an operational, economic and regulatory standpoint.

Having the right substance in Luxembourg is essential when considering the potential benefit of a double taxation treaty or EU Directives.

It will be even more important in the future when new European Directives will be transposed in domestic law (in particular the general anti-abuse rule or the Controlled Foreign Companies (CFC) rule of the ATA Directive), and when the Principal Purpose Test (PPT) rule will be inserted in certain in tax treaties of Luxembourg as a result of the Multilateral Instrument (MLI - BEPS Action 15).