Credit: OECD

On 9 April 2019, Luxembourg became the latest signatory of the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS). 

The Convention, otherwise known as the "Multilateral Instrument" (MLI), requires that each jurisdiction provides a list of reservations and notifications at the time of signature. In line with the MLI ratification process, Luxembourg has deposited its ratification instrument with the OECD, thus triggering the MLI's entry into force. 

The process began on 14 February 2019, when the Luxembourg Parliament passed a law on the ratification of the MLI into Luxembourg domestic tax law. Now that the Grand Duchy has filed its ratification instrument, the MLI will enter into force for all signatories on the first day of the month following three months after the ratification by Luxembourg (1 August 2019). This will include Covered Tax Agreements (CTAs).

According to KPMG Luxembourg, the MLI will come into effect for withholding taxes around the first day of the next calendar year of the entry into force (1 January 2020). For all other taxes, the MLI provisions will apply to taxable periods beginning on or after the expiration of six calendar months from the date of entry into force (1 February 2020). This means that in the case of taxpayers having a taxable period that follows the calendar year, the MLI provisions would be applicable by 1 January 2021 only.