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Luxembourg Amends Law on Financial Collateral Arrangements

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Luxembourg Amends Law on Financial Collateral Arrangements

Luxembourg is the second largest investment fund center in the world after the U.S. Assets under management exceed U.S. $5.0 trillion. This largely is due to the advanced investment fund legislation and favorable legal framework for investors regarding pledged collateral. Earlier this year, the law was amended to reflect current market concepts. To illustrate, an enforcement event is now defined as an event of default or any other event that triggers an enforcement action as agreed between the parties. If an enforcement event occurs and the collateral consists of financial instruments that are traded on an exchange or market, the holder of the pledgee may, without prior notice (i) assign or cause the pledged collateral to be assigned on that exchange or market or (ii) appropriate the pledged financial instruments or have them appropriated by a third party, at market price. Also, execution on the pledge can be instituted when and as the parties have agreed in the pledge. A final legal determination against the pledgor is no longer a prerequisite for execution against the collateral. These and other aspects of the amended law are explained by Anton Baturin and Graham Wilson, members of Wilson Associates L.L.C., an international business law firm in Luxembourg.

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D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations

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D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations

In their article entitled “D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations Exists,” Sonia Belkhiri and Jiar Al-Zawity of Wilson Associates, International Lawyers, Luxembourg, discuss official guidance to date and caution of the likelihood that exists for double counting reporting mechanisms. Their view is that the limited clarification within the commentaries to the draft law in Luxembourg and the State Council opinion have not been followed by the Luxembourg Government. Practical guidance from the Luxembourg tax authority has not been sufficient.

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New Tax Treaty Between France and Luxembourg: French Tax Implications for Investors

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New Tax Treaty Between France and Luxembourg: French Tax Implications for Investors

France and Luxembourg signed a new double tax treaty on income and capital in late March.  Ratification by the end of the year is anticipated.  The new treaty reflects the current post-B.E.P.S. environment.  Among other things, the residence definition is tightened, the test for the existence of a permanent establishment is loosened, real estate funds face higher withholding tax, a credit method is adopted to avoid double taxation.  Christophe Jolk, Attorney at Law, Paris, explains the implications for investors.

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The Past, Present, and Future of Luxembourg Special Purpose Companies

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Amid a global context of widespread budget deficits, it seems that politicians have finally discovered that multinational enterprises, entrepreneurs, and high net worth individuals have recourse to legal frameworks that allow for the tax efficient structuring of investments. This article addresses the evolution of international tax planning through the use of Luxembourg S.P.V.’s from its origins to its heyday and future prospects in light of ongoing discussions at the level of the O.E.C.D. and the European Commission.

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McDonald's Accused of Re-Routing Royalty Payments to Avoid Billions in European Taxes

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Labor unions are accusing McDonald’s of avoiding €1 billion in tax by re-routing revenue through Swiss and Luxembourg units.

McDonald’s apparently asked its various franchises to pay it royalty revenue for using the McDonald’s brand.

A Bad Month for Luxembourg

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Luxembourg made front-page news last month with the leak of hundreds of documents that had been signed when current European Commission President, Jean-Claude Juncker, was prime minister and finance minister of Luxembourg. The leak, exposed by the International Consortium of Investigative Journalists (“I.C.I.J.”), revealed confidential agreements approved by Luxembourg authorities that provided tax relief to more than 340 global companies.

The leaked documents implicated not only private companies but also revealed that the Canadian government received a tax ruling for its Public Sector Pension Investment Board, which manages pensions for all Canadian federal employees. The Canadian Pensions Board issued a statement addressing this ruling and claimed that since it is tax-exempt in Canada its ruling is not tax avoidance as it has “no tax advantage.”

The European Union Antitrust Authority is now expected to expand its ongoing illegal state aid probe using the leaked documents in its investigation. A high-level European Commission official said, “We expect to expand our current request for documents…These documents are now available. They are clearly relevant to the ongoing probe, which is a high political priority.”

POLITICAL PRESSURE

The leaked documents put Luxembourg in hot water, especially former prime minister and finance minister, Jean-Claude Juncker, who now faces great political pressure to explain his role in the scandal. He is accused of acting to enrich his country at the expense of its European partners. His actions are purported to have been in defiance of the E.U. spirit, which he hopes to represent as the new Commission President.