Luxembourg Tribunal held that the Use of Corporate Tax Losses Amounts to Abuse of Law: What went wrong?

On 30 March 2023, the Luxembourg Administrative Tribunal held its decision in a case that concerns the use of corporate tax losses by a Luxembourg company. The Luxembourg company incurred its tax losses when it was a holding company and intended to use these losses, following several years of being dormant, to offset a capital gain realised upon disposal of a Luxembourg real estate property.

The Luxembourg tax authorities challenged the use of the tax losses based on the abuse of law provision provided in § 6 of the Tax Adaptation Law. The Tribunal followed the decision of the tax authorities and rejected the use of the tax losses.

As the use of corporate tax losses is a fundamental feature of the Luxembourg tax system, the question arises whether the Tribunal was right when concluding that the use of tax losses was an abuse of law. This question is analysed in detail in this article.