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Luxembourg adopted a “first mover» position towards the measures set out in the Organisation for Economic Co-operation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) action plan. In particular, to comply with Action 5 (Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance) of the plan, the Luxembourg Chamber of Deputies passed the Luxembourg law of 18 December 2015 (“the December 2015 Law”), repealing and replacing the former intellectual property (“IP”) box tax regime, subject to a transition regime with a grandfather clause.
The final version of the BEPS’ Action 5 puts an emphasis on the so called “nexus approach” which...
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