On December 18th 2018, the Luxembourg Parliament (Chambre des Députés) passed Draft Law No. 7318 which transposes into domestic law the Anti-Avoidance Tax Directive (“ATAD”). The law was adopted without any substantial amendments to the draft version we previously covered (please refer to our July 2018 newsletter article for more details) and entered into force on January 1st 2019, except for the provisions related to the exit tax, which will be applicable as of January 1st 2020.
As a reminder, the law introduces interest deductibility limitations and anti-hybrid measures, to which taxpayers should pay specific attention, as well as a whole set of other measures, such as a new general anti-abuse rule, a controlled foreign company regime and a new exit tax. The law also introduces two non-ATAD related provisions, firstly amending the definition of a permanent establishment and secondly excluding debt-to-equity conversions from the scope of the roll-over relief regime (please refer to our July 2018 newsletter article for more details).