Luxembourg has sharpened its corporate tax rules since 1st of January. These will make it more difficult for large corporations to avoid tax by channelling funds through the small European country, a practice known as “LuxLeaks” as per media reports.
From now on financing between different units of the same company should be carried out as if they were unrelated firms.
The European Commission welcomed the new rules: “The general, forward-looking change of approach announced by Luxembourg is very welcome,” Commissioner Margrethe Vestager said in a statement.
Last year, the Commission ordered Luxembourg to recover 20 to 30 million euros ($21-$31 million) from Italy’s Fiat, saying the carmaker had benefited from illegal tax deals with the Grand Duchy.