On April 17 Luxembourg’s administrative court ruled on the classification and tax treatment of interest-free loans (IFL) for Luxembourg tax purposes. Although this case involved an unusual set of circumstances, the decision created a great deal of uncertainty surrounding the classification of IFLs as well as the classification of financing instruments in general.
In this tax notes international article, our Tax Partner and Head of Transfer Pricing, Oliver R. Hoor, provides an overview of the facts of the case and the decisions of the Luxembourg courts and analyses IFL classification for Luxembourg tax purposes and explores the classification of interest-free loans in Luxembourg for tax purposes following a recent Luxembourg administrative court ruling.