Luxembourg: Amended draft law implementing Pillar Two global minimum tax

Clarifications and technical aspects from the OECD administrative guidance on the Pillar Two rules

Clarifications and technical aspects from the OECD administrative guidance

An amended bill implementing the EU Minimum Tax Directive (Council Directive (EU) 2022/2523 of 14 December 2022) was filed with the Parliament on 13 November 2023.

The amended bill incorporates several clarifications and technical aspects from the Organisation for Economic Cooperation and Development (OECD) administrative guidance on the Pillar Two rules released in February 2023 and July 2023, which were not yet included in the initial bill released on 4 August 2023. Read TaxNewsFlash

In particular, the amended bill introduces changes regarding:

  • Accounting standard to be used for calculation of the qualified domestic minimum top-up tax (QDMTT) 
  • Exclusion of investment entities and insurance investment entities from the QDMTT
  • Safe harbour rules, including QDMTT safe harbour, permanent safe harbour, and undertaxed profits rule (UTPR) safe harbour 
  • Other new elections and clarifications, including:
    • Excess negative tax carry-forward election
    • Equity investment inclusion election
    • Substance-based income exclusion

KPMG observation

It remains unclear is to what extent other aspects clarified by the OECD that are not yet reflected in the amended bill may apply (e.g., guidance on transitional rules with respect to transfer of assets or on deemed consolidation). The initial bill provides that the work of the OECD can be used as a source of illustration or interpretation, but it is unclear whether a change of law would be required for any of the aspects clarified by the OECD, or whether taxpayers can rely on this general statement. 

Next steps

The draft law still needs to undergo the usual legislative process to become law, including comments from the State Council. Whether the law will be voted before the end of the year to comply with the transposition deadline of the EU Minimum Tax Directive is uncertain.

Read a December 2023 report prepared by the KPMG member firm in Luxembourg




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