On July 17, 2024 a bill of law has been presented to Luxembourg Parliament (Bill 8414), the most important provisions of which we have summarized in our AIF quarterly update available here.
During the parliamentary process, Bill 8414 has been amended and such amended draft was voted and finally adopted by Luxembourg Parliament on December 20, 2024 (the Amending Law), updating the Luxembourg Income Tax Law (LITL)[1]
Amongst other provisions, the Amending Law updates the existing Luxembourg Interest Deduction Limitation Rules (IDLR) with the notion of a single company worldwide group (SCWG).
Following the example of the Irish IDLR regime, an exemption from the IDLR is now included for a SCWG.
The term SCWG encompasses entities that (i) are not part of a consolidated group for financial purposes and (ii) are not considered autonomous, stand-alone entities. In other words, they are not part of a consolidated group and they have one or more associated entities and/or a permanent establishment(s) outside of Luxembourg, within the meaning of article 164ter 2 LITL. For these SCWG, the total of their exceeding borrowing cost is deductible if they can prove that the ratio of the single entity equity over its total assets is superior or equal to the same ratio of the group (with a tolerated margin of 2% for the ratio of the single entity to be inferior to the ratio of the group). This exemption is applicable upon request of the taxpayer and is subject to specific anti-abuse rules.
This technical precision is welcomed by the Luxembourg capital markets and specifically, with regards to securitisation companies financed with notes to third parties, as it is likely that these entities will not be considered affected by the IDLR, regardless of the assets they hold.
The updated IDLR will be applicable as from fiscal year 2024.
[1] loi modifiée du 4 décembre 1967 concernant l’impôt sur le revenu.
On July 17, 2024 a bill of law has been presented to Luxembourg Parliament (Bill 8414), the most important provisions of which we have summarized in our AIF quarterly update available here.
During the parliamentary process, Bill 8414 has been amended and such amended draft was voted and finally adopted by Luxembourg Parliament on December 20, 2024 (the Amending Law), updating the Luxembourg Income Tax Law (LITL)[1]
Amongst other provisions, the Amending Law updates the existing Luxembourg Interest Deduction Limitation Rules (IDLR) with the notion of a single company worldwide group (SCWG).
Following the example of the Irish IDLR regime, an exemption from the IDLR is now included for a SCWG.
The term SCWG encompasses entities that (i) are not part of a consolidated group for financial purposes and (ii) are not considered autonomous, stand-alone entities. In other words, they are not part of a consolidated group and they have one or more associated entities and/or a permanent establishment(s) outside of Luxembourg, within the meaning of article 164ter 2 LITL. For these SCWG, the total of their exceeding borrowing cost is deductible if they can prove that the ratio of the single entity equity over its total assets is superior or equal to the same ratio of the group (with a tolerated margin of 2% for the ratio of the single entity to be inferior to the ratio of the group). This exemption is applicable upon request of the taxpayer and is subject to specific anti-abuse rules.
This technical precision is welcomed by the Luxembourg capital markets and specifically, with regards to securitisation companies financed with notes to third parties, as it is likely that these entities will not be considered affected by the IDLR, regardless of the assets they hold.
The updated IDLR will be applicable as from fiscal year 2024.
[1] loi modifiée du 4 décembre 1967 concernant l’impôt sur le revenu.