page_title: LuxLeaks
section_title: Luxembourgish tax regime illuminated
hierarchical_section_title: LuxLeaks / Revelations / Luxembourgish tax regime illuminated
caption_attribution_description: English: Administrative and financial building for KPMG, Luxembourg Kirchberg, Luxembourg
context_page_description: Luxembourg Leaks is the name of a financial scandal revealed in November 2014 by a journalistic investigation conducted by the International Consortium of Investigative Journalists. It is based on confidential information about Luxembourg's tax rulings set up by PricewaterhouseCoopers from 2002 to 2010 to the benefits of its clients. This investigation resulted in making available to the public tax rulings for over three hundred multinational companies based in Luxembourg.
  The LuxLeaks' disclosures attracted international attention and comment about tax avoidance schemes in Luxembourg and elsewhere. This scandal contributed to the implementation of measures aiming at reducing tax dumping and regulating tax avoidance schemes beneficial to multinational companies.
  The judicial aspects of this case concern the persons charged by Luxembourg justice for participating in the revelations. No multinational company was charged. The LuxLeaks trial took place in spring 2016 and led to the condemnation of the two whistleblowers. The appeal trial's judgment delivered in March 2017 confirmed their condemnation.
context_section_description: LuxLeaks revelations shed light on  the Luxembourgish tax regime, highly beneficial to multinational companies. Foreign corporations started settling in Luxembourg in large numbers in the early 1990s, when  Luxembourg transposed in its national law an EU directive that allowed companies to pay taxes in a European headquarters country other than where their subsidiaries operated.
  Tax rulings are set up by large accounting firms (the "Big Four") for the benefits of their clients, multinational companies, and then approved by the Luxembourgish tax administration. Tax rulings include schemes to transfer revenues to Luxembourg. Transfer pricing is one of the mechanisms used by multinational corporations to reallocate profits. Intragroup loans are another possible mechanism: a company based in a high-tax country makes a loan at a low interest rate to a subsidiary in Luxembourg. The interest rate reflects the credit rating of the company group, for example 1%. The subsidiary in Luxembourg is typically set up with the purpose of loaning money at high interest rates, for example 9%,  back to another subsidiary outside Luxembourg. Since the tax regime in Luxembourg is tailored to be advantageous for the financial arm of multinational companies, the profits generated there are taxed at very low rates. Such mechanisms are effective means to erode tax bases in countries with high tax rates and to shift profits to countries where they are less taxed (see also Base erosion and profit shifting).
  In many cases the companies' presence in Luxembourg is only symbolic. For instance, 1,600 companies are registered at the same address – 5, rue Guillaume Kroll – in Luxembourg.
caption: KPMG builds a new office building for 1,600 staff in Luxembourg[16]
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