Luxembourg - Tax

On 25 March 2024, Luxembourg tax authorities issued FAQ regarding the law on the minimum effective taxation transposing Council Directive (EU) 2022/2523 of 15 December 2022 (“Pillar 2 Law”), further explained in our previous quarterly updated (Q3 2023 and Q4 2023).

The initial FAQ, which will further be regularly updated and amended, focuses on Chapter 11, Article 53 of the Pillar 2 Law and provides clarifications in respect to transitory provisions on tax treatment of the deferred tax assets and deferred tax liabilities, as per the Pillar 2 Law.

As per the FAQ, the deferred tax assets and deferred tax liabilities are to be reflected or disclosed in the financial statements of the constituent entity or in the consolidated financial statements of the ultimate parent entity of the group in a reliable and consistent manner, traceable back to the constituent entity. For the purposes of this provision, terms “reflected” has been defined as included in the balance sheet and term “disclosed’ means presented in the notes to the financial statements.

The deferred tax assets and deferred tax liabilities are to be reflected or disclosed in respect to the financial statements for the transition year, however the FAQ recommends disclosing them in respect to the year preceding the transition year.

Issuance of the FAQ in respect to a legislation as complex as Pillar 2 Law is certainly welcome and we expect further regular updates of the document, in order to facilitate the application and interpretation of the Pillar 2 Law.