The following tests represents a practical approach for companies willing to determine, under general basis, whether the conditions governing their intra-group transactions are in line with economic substance and transfer pricing requirements in Luxembourg. Those 2 tests will also give you an insight of the level of exposure of the company. Please note that this should not be construed as an advice and commit TFPS nor its employees to any binding opinion. Sole a proper review of facts and circumstances duly signed can bind TFPS.

Test 1 : Economic Substance

Please answer the questions and click at bottom “Substance Analysis” in order to generate the results of your test :

Does Luxembourg Company hold at least one of the shareholders’ meetings at its registered office ?



A shareholder meeting is not as relevant as board meeting properly held however it demonstrates the interest of the shareholder in at least a yearly review of the management of his/her/it company and should strengthen the reason of “why Luxembourg”.

A shareholder meeting is not as relevant as board meeting properly held however it improves the economic rationale of the choice of the country as the shareholder shows interest in the management of its company

Is the board of directors mainly composed of Luxembourg Tax residents?



The company complies with the condition set forth in the circular on intragroup financing.

The conditions in the circular on the intragroup financing is, as such, not complied with. Non resident board members should take care of holding frequent meetings in Luxembourg and properly documented. To be on the safe side, it might be recommended to strengthen the management body with one or more Luxembourg resident directors or non resident professionally working effectively in Luxembourg.

Does Luxembourg Company have qualified personnel ?



The Company does have, on paper, the technical skills to comply with its corporate object. It is however also important to stress the decision making process of these persons or their related work is effectively mainly done in Luxembourg (place of management and control).

The Company has, on paper, not the technical skills to evaluate in its business environment (ex : a housemaid, without disregarding her skills, deciding on a one million transaction or performing consolidated budget review

Does Luxembourg Company have the necessary human and technical resources to perform its corporate activities ?



The Company fits with the most important criteria as it is capable that it can carry out its activities.

The company is in a risk of breach of substance and could be disregarded. It is strongly recommended to align the resources to enable the company to carry out its activities







For a detailed examination, contact us. It is free of charge !


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Disclaimer

The outcome of the analysis as detailed above is only meant to provide a broad overview for discussion purposes of the products and services offered by TransFair Pricing Solutions S.A. (“TFPS”).

The data used for the purpose of the analysis is derived from various sources, and it is assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed, and no liability is assumed by TFPS for any direct or consequential losses arising from its use.

Accordingly, the information displayed on this Website does not constitute an offer or solicitation in respect of the products and services of TFPS.

Furthermore, the information displayed on this Website is not intended to be, and should not be construed as, legal or tax advice, and anyone who acts on the information does so entirely at their own risk.

Statements made on this Website are subject to the provisions of an ‘Engagement Letter’, as supplemented by the ‘General Terms and Conditions’ of TFPS, that may have been, or will be, concluded.


Test 2 : Transfer Pricing

Please answer the questions and click at bottom “Transfer Pricing” in order to generate the results of your test :

Does the Luxembourg Company apply the simplification method in its tax return (net income of 2% (after tax) on the assets financed) ?



• The Company can apply the simplification method only when qualify as a pure intermediary for intra-group financing activities.
• The Company should attach to its tax return an annex which contains details about the application of the 2% of net income (after taxes) on the asset financed.
• The Company still has to prepare a transfer pricing study to document its transactions with related parties which don't fall in the scope of intra-group financing activities.

• The Company should have a transfer pricing study to document its transactions with related parties
• The Company should attach to its tax return an annex which contain details about the application of the arm’s length remuneration on its transactions with related parties

Does the Luxembourg Company perform a transfer pricing analysis to document its transactions with related parties ?



The Company should attach to its tax return an annex which contain details about the application of the arm’s length remuneration on its transactions with related parties

The Company does not need to prepare a transfer pricing study for its intra-group financing transaction only if the Company apply the simplification method.
The Company still has to prepare a transfer pricing study to document its transactions with related parties which don't fall in the scope of intra-group financing activities.

Does the Luxembourg Company apply the transfer pricing remuneration in its tax return, in line with the transfer pricing analysis ?



The Company should attach to its tax return an annex which contain details about the application of the arm’s length remuneration on its transactions with related parties

The Company should apply in its tax return an arm’s length remuneration in line with a transfer pricing study.

Does the Luxembourg Company update its transfer pricing analysis on a regular basis ?



The Company should have a proper documentation to demonstrate the review or update of the transfer pricing analysis.

The Company should review or update its transfer pricing analysis if the financing conditions and economic circumstances of Company under analysis change.






For a detailed examination, contact us. It is free of charge !


GDPR AGREEMENT

I consent to having this website store my submitted information so they can respond to my inquiry.



Disclaimer

The outcome of the analysis as detailed above is only meant to provide a broad overview for discussion purposes of the products and services offered by TransFair Pricing Solutions S.A. (“TFPS”).

The data used for the purpose of the analysis is derived from various sources, and it is assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed, and no liability is assumed by TFPS for any direct or consequential losses arising from its use.

Accordingly, the information displayed on this Website does not constitute an offer or solicitation in respect of the products and services of TFPS.

Furthermore, the information displayed on this Website is not intended to be, and should not be construed as, legal or tax advice, and anyone who acts on the information does so entirely at their own risk.

Statements made on this Website are subject to the provisions of an ‘Engagement Letter’, as supplemented by the ‘General Terms and Conditions’ of TFPS, that may have been, or will be, concluded.