Luxembourg vs SA, October 2007, Administrative court, Case No 23053

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The question in this case was if a loan had been granted in accordance with the arm’s length principle.

In it’s judgament the court relied on the principles that should drive a prudent and diligent business manager.

.. its behavior is to be qualified by reference to the medium-prudent and diligent creditor acting on the market in that the latter would have undeniably sought to have a clause allowing a reduction in the cost of its financing.

The principle of qualifying dealings based on a “ordentlicher und gewissenhafter Geschäftsleiter” can be attributed to the German origins of the tax system in Luxembourg.

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