Luxembourg adopts national legislation on DAC9 and implements January 2025 OECD guidelines

A closer look

On 17 December 2025, the Luxembourg Parliament adopted Bill No. 8591. This law transposes Council Directive (EU) 2025/872 (DAC9) into Luxembourg law and implements the OECD/G20 Inclusive Framework’s Multilateral Competent Authority Agreement on exchange of GloBE Information (GIR MCAA). Furthermore, the law implements the OECD January 2025 approved administrative guidelines, which provide clarifications on technical computations and administrative aspects.

As detailed in our previous tax alert Pillar Two law update and implementation of automatic exchange of GloBE Information Return, the key changes introduced by the bill relate to (1) the automatic exchange of information and GIR filing, and (2) the implementation of the OECD January 2025 approved administrative guidelines.

No relevant changes were made during the legislative process, except for the introduction of a “grace period” related to the switch off rule concerning the Qualified Domestic Minimum Top-up Tax (QDMTT) Safe Harbor, as explained further below.
 

1. Automatic exchange of information and GIR filing: Relevant provisions

Under the Luxembourg Pillar 2 Law, Luxembourg constituent entities are required to file a GloBE Information Return (GIR) within 15 months after the end of the fiscal year (18 months for the first year of the rules’ application). Exemptions from the filing may apply if a GIR is filed by: (a) the Ultimate Parent Entity (UPE), (b) a foreign designated entity, or (c) a designated local entity. For the first two cases, an "eligible competent authority agreement" must be in place between Luxembourg and the relevant jurisdiction, and such jurisdiction must be included in a Grand-Duchy regulation list.

The bill establishes a framework for the automatic exchange of the GIR between the competent authorities of EU Member States through the implementation of DAC9, and with third countries, relying on the GIR MCAA or any other relevant bilateral agreement in place.

When a GIR is filed in Luxembourg, the tax authorities will share information with other jurisdictions only if it is relevant to their specific Pillar Two implementation (Dissemination Approach).

The deadline for information exchange will be three months after the filing deadline (six months for the first year of the rules’ application). Penalties will apply in the event of non-compliance with these obligations.
 

2. Implementation of January 2025 OECD Guidelines: Amendment to the Luxembourg Pillar 2 Law

The draft law initially proposed that Deferred Tax Assets (DTAs) and Deferred Tax Liabilities (DTLs) arising after 30 November 2021, due to governmental arrangement, retroactive options or elections, or new corporate tax laws, should not be recognized for Pillar 2 purposes. However, a grace period was introduced, allowing the limited use of these DTAs and DTLs, capped at 20% of the original amount, for a transitional period.

A similar provision, known as the “switch-off rule,” was included in the draft law. Under this rule, Luxembourg would be authorized to disregard the QDMTT Safe Harbor of another jurisdiction and apply its own Income Inclusion Rule (IIR) or Under-Taxed Profits Rule (UTPR) if that jurisdiction fails to exclude the same DTAs and DTLs from its calculations. The Council of State noted that the initial draft was more restrictive than OECD recommendations. According to the OECD guidelines, a "grace period" is also allowed with respect to the QDMTT Safe Harbor.

As a result, during the legislative process, the law was amended to include the grace period (Article 14(3)).  This means jurisdictions may be permitted the use of these specific deferred taxes without triggering the switch-off rule, provided that the usage is capped at 20% of the initially recognized amount during the transitional years.

This amendment ensures full compliance with the OECD guidelines in the Luxembourg Pillar 2 Law.
 

Next steps

After the exemption from the second vote by the Council of State obtained on 19 December 2025, the signature and publication of the law in the Official Journal are expected by the end of the year.