SLIDE 1
Transfer Pricing in Luxembourg Managing the tax treatment of intra-group financing activities
www.pwc.com
Clarification of “principally”
June 2011
Transfer Pricing in Luxembourg Managing the tax treatment of - - PowerPoint PPT Presentation
Transfer Pricing in Luxembourg Managing the tax treatment of - - PowerPoint PPT Presentation
www.pwc.com Transfer Pricing in Luxembourg Managing the tax treatment of intra-group financing activities Clarification of principally GroupCo Payable 70% IP activity LuxCo 30% Financing Receivable ForeignCo June 2011
SLIDE 2
SLIDE 3
Intra-group financing transactions
Payable Receivable
GroupCo LuxCo ForeignCo Payable
Receivable
3rd Party LuxCo ForeignCo
SLIDE 4
Related party definition
Payable Receivable GroupCo LuxCo 3rd Party
June 2011
SLIDE 5
Arm’s Length Remuneration
The arm’s length compensation is based on:
- Functions performed
- Risks borne
- Assets utilised
June 2011
SLIDE 6
Arm’s Length Remuneration
The arm’s length compensation is based on:
- Functions performed
- Risks borne
- Assets utilised
Therefore:
Functions / Risks / Assets Expected Profit
SLIDE 7
Equity at risk
June 2011
Parent Company LuxCo Equity € 2M Borrower Payable Receivable
Risk
SLIDE 8
Substance Requirements
- A majority of the members of the board of directors are either Luxembourg
residents, or non-residents with their main professional activity in Luxembourg.
- These members/ directors/ managers need to have the required
professional knowledge to fulfill their duties correctly.
- The entity must have qualified resources capable of executing and
rewarding the transactions executed (either employees on entity’s payroll,
- r outside personnel).
- Key decisions concerning the entity’s management have to be taken in
Luxembourg (shareholder meeting if required by law).
- The entity must have at least one bank account in Luxembourg.
- The entity must have met all the requirements related to the filing of tax
returns.
- The entity should not be considered a tax resident of another country.
- The entity should maintain an adequate level of capital with regards to the
functions performed (taking into account assets used and risks assumed).
June 2011