Luxembourg Tax Glossary

This glossary aims at explaining frequently used terms in taxation in a simple manner.

ATAD - European Union Directive 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.

BEPS - Base Erosion and Profit Shifting refers to the OECD project aimed to avoid tax avoidance strategies or to tackle aggressive tax planning that exploit gaps and mismatches in tax rules of different jurisdictions or take advantage of the technicalities of a tax system, to artificially shift profits to low or no-tax locations, or otherwise reduce tax liability. ATAD is the EU answer to this project.

CFC - Controlled Foreign Company regime aims to attribute in certain circumstances undistributed profit to a parent company when the controlled foreign company is located in a low or no tax country.

Exit Taxation - Tax aiming to appropriately tax companies when they transfer their residence from a country to another. This tax is usually imposed on the unrealized gains, meaning that each country should tax the gains realized in such country.

Interest Deductibility Limitation - Rule aiming to discourage artificial debt arrangements designed to minimize the taxable corporate basis by overindebting via an excess of tax deductible interest payments.

GAAR - General Anti-Abuse Rule aiming to counteract aggressive tax planning by disregarding arrangements established mainly for tax avoidance purposes.

Hybrid mismatches - This rule aims to tackle situations where a cross-border instrument or entity is treated differently for tax purposes by the countries involved, resulting in favorable tax treatment (double deduction, deduction without inclusion and non-taxation without inclusion)

Share Back to main blog

Related blog posts

Loading data