Luxembourg’s ACD tax office granted fewer “advance tax decisions” last year than in 2021. Library picture: Luxembourg’s finance ministry. Photo: Matic Zorman / Maison Moderne

Luxembourg’s ACD tax office granted fewer “advance tax decisions” last year than in 2021. Library picture: Luxembourg’s finance ministry. Photo: Matic Zorman / Maison Moderne

The number of advance tax decisions, often called “comfort letters”, issued by Luxembourg Inland Revenue (ACD) shrank by a fifth, while the success rate of petitioners was flat year-on-year. 

ACD delivered 67 pre-emptive tax opinions in 2022, compared to 84 in 2021 and 72 in 2020. That was down by 20% year-on-year.

The decrease tracked a significant drop in the overall number of advance tax decisions compared to a few years ago. The total number dropped by 90% between 2015 and 2020.

The ratio of positive replies to taxpayer requests remained stable at 69% in both 2021 and 2022. ACD granted 83%-85% of taxpayer requests in 2015-2017. 

There are two types of advance tax decisions: advance tax rulings, written confirmation of how tax law will be applied to a taxpayer’s specific case, and advance price agreements, how transactions between different parts of a multinational corporation will be treated. 

Companies and wealthy individuals seek the opinions before striking a deal to ensure they have correctly calculated the tax consequences of the arrangement. Comfort letters have been criticised by campaigners for being distortive and often unfair, and by the European Commission, which has said they sometimes amount to unlawful state aid.

Luxembourg’s finance ministry released the figures on 30 March 2023 in an to its 2022 annual activity report.

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