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Database of Transfer Pricing Case Laws

Luxembourg vs “EQ LUX”, May 2024, Administrative Tribunal, Case No 47267 (ECLI:LU:TADM:2024:47267)

Posted on May 8, 2024 | By Courts of Luxembourg | No comments

Category: Delineation - Substance over Form, Financial Transactions, Non-Recognition and Recharacterisation, Tax Avoidance Schemes, Tax Treaty Interpretation | Tag: Abuse of law, Article 5, Capital in nature, Debt/Equity Ratio, Equity or Debt/Loan, Hidden contribution, Interest free loan, Malaysia, Substance over form

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“EQ LUX” had classified its interest-free intra-group contributions as loans for tax purposes and treated a Malaysian branch with very limited substance as a permanent establishment.

The tax authorities reclassified the loans as equity and denied permanent-establishment status to the branch.

“EQ LUX” appealed to the Administrative Tribunal.

Dicision of the Tribunal

The Administrative Tribunal dismissed the appeal of “EQ LUX” and ruled in favour of the tax authorities.

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Related Guidelines

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Supplemental Guidance

Luxembourg vs “EQ LUX”, April 2025, Administrative Court, Case No 50602C (ECLI:LU:CADM:2025:50602)A Luxembourg company classified interest-free intra-group advances as loans and claimed a Malaysian branch constituted a permanent establishment. The tax authorities reclassified the advances as equity and denied PE status. The Administrative Court, applying substance-over-form doctrine in April 2025, confirmed both challenges: the financing behaved as capital given excessive leverage...

Finland vs. Corp, July 2014, Supreme Administrative Court KHO:2014:119A Finnish subsidiary deducted interest on a EUR 15 million subordinated hybrid loan bearing 30% interest from its Luxembourg parent. The Finnish tax authorities sought to reclassify the loan as equity, denying the deduction. The Supreme Administrative Court ruled in favour of the taxpayer in 2014, holding that domestic transfer...

Austria vs Shareholder, July 2019, Bundesfinanzgericht, Case No RV/1100628/2016A taxpayer holding 98% of a Swiss joint stock company provided a EUR 30 million interest-free shareholder loan with no written agreement. The Austrian tax authority imputed a 2% interest rate based on rates charged by the Swiss company to its Austrian and German affiliates. The Bundesfinanzgericht ruled in favour...

Luxembourg vs “Lux SARL”, September 2022, Administrative Tribunal, Case No 44902A Luxembourg company received funding via a profit participating loan from a related Cayman Islands entity and claimed notional interest deductions on a capital gain from securities. The Luxembourg tax authority disregarded the financing classification and denied the deductions, finding the structure was adopted solely for tax purposes. The Administrative...

Luxembourg vs “LLC AB”, November 2023, Administrative Court, Case No 48125CA Luxembourg company received an interest-free credit line from a related party and deducted notional interest for tax purposes. The tax authorities recharacterised the instrument as equity and disallowed the deductions. After the Administrative Tribunal dismissed the appeal, the Administrative Court overturned that decision in November 2023, finding that the...

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Luxembourg vs “EQ LUX”, May 2024, Administrative Tribunal, Case No 47267 (ECLI:LU:TADM:2024:47267)

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