Tax 5 min read
Luxembourg intragroup financing
The tax and documentation requirements for financing between group companies.
Transfer pricing studies and documentation in Luxembourg
When related companies, for example in the same group, lend to each other or charge each other for services, the terms they agree need to be justified. This is what transfer pricing is about. We prepare the studies and documentation for Luxembourg companies, based on the transaction and the role of each company.
Work shaped around the transaction
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Financing within a group
For a new loan, a refinancing or a review of existing debt, we examine the loan terms, the borrower’s credit standing and what the lender should earn. Acquisition funding and shareholder loans are assessed on their own facts.
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Services and other transactions
We analyse services, sales of goods and transactions involving intangible assets such as brands or patents between group companies. The work starts with what each company does, the assets it uses and the risks it takes, before choosing a pricing method.
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Reviewing existing documentation
An acquisition, a change in operations or revised contractual terms can change the basis of an earlier study. We assess which conclusions remain relevant and which parts need updating.
From the facts to a documented conclusion
We first agree the transactions and periods to be covered, then compare contractual terms with what the parties actually do. Discussions with the people who make decisions and oversee the transactions help establish each company’s role.
The study sets out each company’s role, known as the functional analysis, then the method chosen, the comparable data and the calculations supporting the conclusion. The search for comparable transactions and any adjustments depend on the transaction. The study can cover a single arrangement or bring several transactions together in a fuller report.
Articles 56 and 56bis of the Luxembourg Income Tax Law establish the arm’s-length principle. It means comparing the agreed terms with those independent businesses would have agreed in comparable circumstances. The format and level of detail of the documentation are set for the transactions under review.
Connecting the study with decisions and reporting
The conclusion needs to connect with agreements, accounting records and tax returns. We explain the assumptions, the open points and the changes that would call for a further review.
You can ask us for the study without handing over the company’s annual accounting and tax work. For international groups, our Luxembourg work is aligned with advisers in the other countries. A transfer pricing report is not an approval from the tax authorities and does not replace a review of the other tax rules that affect the transaction.
Discuss the transaction and its timetable
Tell us which companies and countries are involved, the transactions and periods to cover, and when you need a conclusion.
Discuss a transaction between related companies 
Frequently asked questions
Can the study cover a single shareholder loan?
Yes. The work can be limited to one specific loan. It then sets out the companies involved, the loan terms and the period under review.
Does the group need to have existing documentation?
No. If documentation exists, we review it. If not, we start from the company’s facts, agreements and financial information.
Is transfer pricing documentation included in annual tax compliance?
No. A transfer pricing study is a separate engagement. Its conclusions then feed into the accounting and tax reporting, whether we or another provider handle that work.