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Payment of interests and royalties to Blacklisted jurisdictions no longer deductible as from 21st January 2021

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Luxembourg

Our tax team provide the latest update on payment of interests and royalties to blacklisted jurisdictions.
 
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On 30 March 2020 The Luxembourg Government filed a new bill (7547) to the effect of denying, as from 1st January 2021, the deduction of interests and royalties payable to "collective entities" established in one of the (currently 12) "non-cooperative" jurisdictions listed by the EU, including American Samoa, Cayman Islands, Fiji, Guam, Oman, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, US Virgin Islands and Vanuatu. Such list is to be updated on a regular basis, probably in October 2020.
 
Last but not least, the new provision (article 168 LITL) would not be applicable, and therefore full deductibility ensured (subject to general rules) in case the transaction giving rise to interests or royalties is used for valid commercial reasons reflecting the economic reality - to be demonstrated by the taxpayer. The new provision is due to enter into force as from 1st January 2021.
 
For further details, please contact jean-luc.dascotte@fieldfisher.com or your usual contact at Fieldfisher.
 

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