August 5, 2021

the new trick to bypass tax transparency in Luxembourg

On paper, Luxembourg is no longer an opaque tax haven. It has become exemplary, putting an end to the excesses brought to light by the “LuxLeaks” – an international investigation which revealed, in 2014, the existence of zero-rate tax agreements granted by the hundreds to multinationals for decades. These agreements (called « rulings », or “Rewritten”) fell 90%, with just forty-four rewritten signed in 2020. As soon as they were liable to tax another European State, they were transmitted to the latter, in accordance with European rules. On paper, therefore, Luxembourg is flawless.

The “LuxLetters” survey, conducted by The world, the Southgerman newspaper, The world, Woxx and IrpiMedia, with the NGOs Tax Justice Network (TJN) and The Signals Network, however, questions the reality of this transparency effort. According to corroborating testimonies taken on condition of anonymity, tax advisers working for large firms based in Luxembourg have indeed found a way to bypass European regulations on the exchange of rulings, without the Luxembourg authorities finding it. to complain about.

“Newsletters” diverted from their purpose

Their trick takes the form of a letter by which a tax expert informs the Luxembourg administration of the advantageous tax treatment from which his client (a company or an investment fund) intends to benefit, and for which the silence of the authorities would be worth approval. On the Luxembourg market, these letters are referred to as “newsletters”. A catch-all term which, in Luxembourg, takes on a very special meaning.

Inaugurated around 2015 to fill the void created by the end of older generation rulings, these letters were intended to test the tax administration on the nature of the schemes still accepted in Luxembourg. Recreating a form of “fiscal certainty” – a concept very popular with investors, of which Luxembourg has always made one of its major assets. But where the shoe pinch is that these missives were quickly diverted from their initial purpose by zealous tax specialists.

Several sources explain that these letters have, in reality, followed the ultra-advantageous rulings, previously blinded and industrially stamped by the Luxembourg tax administration. Tax specialists used it to obtain an implicit agreement from the administration on the tax treatment they intended to apply to a structure created in Luxembourg or a financial transaction, and to sell it as such to their business customers. These letters do not call for a zero tax rate in black and white; rather, they allow a favorable ruling to be made when the tax due on a particularly complex transaction is not clear.

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