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Under New Paragraph 5, Luxembourg tax authorities may request from a taxpayer evidence that the other contracting state effectively recognizes a PE in its territory. The circular clarifies how the taxpayer should provide this evidence.

New Paragraph 5 applies to tax years beginning on or after January 1, 2019.

The addition of New Paragraph 5 in the domestic PE definition aims to resolve conflicts with tax treaties by providing that the PE definition is construed solely on the basis of  criteria mentioned in the relevant tax treaty.

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