Out-Law News 1 min. read

Luxembourg agrees to give details of tax rulings to European Commission

Luxembourg’s government has agreed to “fully comply” with European Commission requests for information on its tax rulings practice and the patent box tax break scheme, the Commission has announced.

EU competition commissioner Margrethe Vestager said on 18 December that Luxembourg “will now provide the Commission with all the requested information outstanding” and that the Commission “no longer needs to pursue infringement action against Luxembourg”.

Vestager said: “I welcome that, by today's announcement, Luxembourg acknowledges the Commission's powers to investigate their general tax rulings practice under (EU) state aid rules. I understand that the Luxembourg authorities have also decided to withdraw their actions against the Commission's information requests before the European courts.”

Tax expert Catherine Robins of Pinsent Masons, the law firm behind Out-Law.com, said: “It appeared from the tone of the Commission’s communications regarding its investigations into the tax rulings given to Amazon and Fiat that it was frustrated by the fact that Luxembourg had not been co-operating fully with the investigations."

Robins said: “The ‘Lux leaks’ revelations about tax rulings and former prime minister of Luxembourg, Jean Claude-Juncker’s position as president of the Commission, have left Luxembourg with little choice but to confirm that it will now ‘play ball’ with the Commission.”

Juncker was under political pressure early in his term as Commission president because Luxembourg, the country he led for 18 years as prime minister, was found to have granted tax rulings to multinational companies that moved profits to the country and paid an effective tax rate of 1%.

According to the Commission, Luxembourg “initially failed to adequately comply with previous requests for information on the tax ruling and the patent box enquiry”. Regarding its tax ruling system, “Luxembourg only provided general information but failed to provide a specific overview of rulings it provided in 2010, 2011 and 2012”, the Commission said. “Luxembourg also refused to deliver certain information on the usage of its patent box scheme, including the details of the 100 largest companies falling under the regime.”

Infringement proceedings were launched by the Commission following the adoption of two decisions ordering Luxembourg to deliver the requested information in March 2014. In parallel, in April 2014, Luxembourg brought two actions for annulment of the Commission's injunction decisions before the General Court, a constituent court of the Court of Justice of the EU.

The Commission has been gathering information on tax rulings from several EU member states, including Luxembourg, since June 2013. The Commission confirmed this month that it had extended that enquiry to all member states.

Separately, the Commission has also requested information about patent boxes from the 10 member states with such regimes, which the Commission named as Belgium, Cyprus, France, Hungary, Luxembourg, Malta, the Netherlands, Portugal, Spain, and UK.

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