Luxembourg Offshore Companies Under OECD Spotlight

The Organisation for Economic Co-operation and Development (OECD) has undertaken an extensive and far reaching review of all OECD member nations’ tax regimes to ensure that no unfair taxation treatment was possible in or between nations and the findings of their survey were finally published at the end of September.

Unfortunately for some, Luxembourg offshore companies have fallen under the OECD spotlight as failing to meet the standards set for the removal of unfair taxation treatment and Luxembourg as a result has disappointed the OECD Committee on Fiscal Affairs.

Luxembourg was the only nation to fail the standards and tests set by the OECD – although Belgium came close – and as a result pressure is now being put on the nation by both the Organisation for Economic Co-operation and Development and the European Union.

Basically the Luxembourg offshore companies that have resulted in the nation being targeted by the OECD are Luxembourg 1929 Holding Companies.  These offshore company structures are not covered by any of the nation’s double taxation treaties and are only subject to minimal amounts of taxation despite being remodelled following the European Union’s recent clamp down on cross border tax evasion and its efforts to improve information sharing as handled under legislation such as the EU Savings Tax Directive and the EU Interest and Royalty Directive.

When the OECD began its review of tax practices back in 2000 it cited 47 nations as having potentially harmful practices in place, but between announcing the initiation of the review and producing the results of it on September 26th 2006 only Luxembourg has failed to impress the Organisation. 

On the whole the review is being heralded as a success but the Committee on Fiscal Affairs’ chairman Paolo Ciocca pointed out in a press conference that his organisation’s work was not at an end and that there would be an ongoing control and review of changes to taxation practices in all of the nations that fall within the OECD remit.  Furthermore, while Luxembourg offshore companies remain under the OECD spotlight the nation has some significant changes to make if it is to avoid being blacklisted.