Luxembourg Finance Minister Pierre Gramegna has on Thursday signed a new multilateral instrument that aims to introduce more transparency to tax conventions.
The agreement is designed to prevent the abuse of tax arrangements among participating countries but leaves it up to the respective country whether it wants to apply every article in the treaty.
Luxembourg has taken full advantage of this option and added restrictions to 16 of the 39 articles in the instrument. The details of those reservations fill 71 pages.
All countries have drawn up lists of restrictions but kept them much shorter than the Grand-Duchy's list.
Countries with which Luxembourg competes tax-wise for the business of international corporations were more guarded. Ireland expressed 12 reservations, Great Britain seven and the Netherlands four.
More than 70 countries signed the agreement, which will alter hundreds of bilateral fiscal conventions to make them align with the OECD's Base Erosion and Profit Sharing's (BEPS) action plan on tax agreements, which pertains to tax avoidance strategies that exploit gaps in tax rules.
"As one of the first signatories to this multilateral instrument," Gramegna said, "Luxembourg reiterates its commitment to fiscal transparency and the prompt implementation of BEPS measures decided by the G20 and the OECD.
"Through this instrument, Luxembourg is updating its agreements network, in line with the new BEPS rules. The instrument makes it possible to close gaps that may exist in the existing tax treaties of the signatory parties and thus constitutes an important step in the construction of a level playing field on a global level."
The list of reservations is also not yet final. Only after ratification by the Luxembourgish Parliament will the list of restrictions be applied in practice.
Gramegna emphasised during a parliamentary debate in January that only by adding reservations would a country be able to avoid having to apply the non-binding rules of the treaty, and that more reservations would therefore give the government more room for manoeuver.
On Twitter, Gramegna hailed the agreement as a "great achievement" and a "game changer".