Luxembourg vs “Lux SARL”, September 2022, Administrative Tribunal, Case No 44902

Posted on | By Courts of Luxembourg | No comments
Category: Financial Transactions, Non-Recognition and Recharacterisation, Tax Avoidance Schemes | Tag: , , , , ,
« | »

In 2016 “Lux SARL” had – via the immediate parent company – been granted funds by a related company on Cayman Islands, in the form of a profit participating loan.

In 2018, after looking into the arrangement, the tax authorities informed “Lux SARL” that it intended to adjust its tax return for the year 2016 insofar as it “(…) does not accept the deduction of notional interest in relation to a capital gain realised on the sale of securities, and after dismissing an objection by Lux SARL, a final assessment was issued in 2019”.

Lux SARL then filed an appeal with the Administrative Tribunal.

Judgement of the Administrative Tribunal

The Tribunal found the appeal of Lux SARL unjustified and upheld the decision of the tax administration.

The Tribunal agreed with the approach taken by the tax authorities disregarding the classification of the financing received and denying deductions of a notional interest. According to the Tribunal, the choice of financing was “made solely for tax purposes”.

Click here for English translation

Click here for other translation

Luxembourg 230922 Case No 44902

Related Guidelines

TPG2022 Chapter VI Annex I example 17 59. Company A is a fully integrated pharmaceutical company engaged in the discovery, development, production and sale of pharmaceutical preparations. Company A conducts its operations in country X. In conducting its research activities, Company A regularly retains independent Contract Research Organisations (CROs) to perform various R&D activities, including designing and...
TPG2022 Chapter I paragraph 1.85 (Example 3) Company A has acquired ownership of a tangible asset and enters into contracts for the use of the asset with unrelated customers. Under step 1 utilisation of the tangible asset, that is the risk that there will be insufficient demand for the asset to cover the costs Company A has...
TPG2022 Chapter VI Annex I example 23 83. Birincil acquires 100% of the equity interests in an independent enterprise, Company T for 100. Company T is a company that engages in research and development and has partially developed several promising technologies but has only minimal sales. The purchase price is justified primarily by the value of the...
TPG2022 Chapter VIII Annex example 1 1. Example 1 illustrates the general principle that contributions should be assessed at value (i.e. based on arm’s length prices) in order to produce results that are consistent with the arm’s length 2. Company A and Company B are members of an MNE group and decide to enter into a...
TPG2022 Chapter VI Annex I example 9 26. The facts in this example are the same as in Example 8, except as follows: Under the contract between Primair and Company S, Company S is now obligated to develop and execute the marketing plan for country Y without detailed control of specific elements of the plan by Primair....
TPG2022 Chapter I paragraph 1.103 The consequences of risk allocation in Example 3 in paragraph 1.85 depend on analysis of functions under step 3. Company A does not have control over the economically significant risks associated with the investment in and exploitation of the asset, and those risks should be aligned with control of those...
TPG2022 Chapter VI Annex I example 8 20. Primair, a resident of country X, manufactures watches which are marketed in many countries around the world under the R trademark and trade name. Primair is the registered owner of the R trademark and trade name. The R name is widely known in countries where the watches are sold...
TPG2022 Chapter VI Annex I example 6 14. In Year 1, a multinational group comprised of Company A (a country A corporation) and Company B (a country B corporation) decides to develop an intangible, which is anticipated to be highly profitable based on Company B’s existing intangibles, its track record and its experienced research and development staff....
TPG2022 Chapter II Annex II example 13 65. Company A, resident in Country A, is the parent company of Retail Group, an MNE group engaged in the retail fashion industry. Over the years, Company A has developed know-how and has enhanced the value of the trademark and associated goodwill of its business through intensive marketing activities. In...
TPG2022 Chapter I paragraph 1.48 The following example illustrates the concept of differences between written contractual terms and conduct of the parties, with the result that the actual conduct of the parties delineates the transaction. Company S is a wholly-owned subsidiary of Company P. The parties have entered into a written contract pursuant to which...

Leave a Reply

Your email address will not be published. Required fields are marked *