Good news! Favourable amendment to Luxembourg tax law

Luxembourg law has just been updated in a way that now gives tax certainty for Securitisations which are owned by Dutch foundations. Previously, it was considered that profits above a threshold of EUR 3 million from non-debt underlying assets could be taxable, but now it has been confirmed that they will not be taxed in Luxembourg. This will help lower costs further for smaller-scale Securitisations because more products can be included on one umbrella. It also means the Securitisation can be used for bigger products. Good news for investors and financial professionals!

https://www.arendt.com/news-insights/news/key-changes-to-luxembourgs-tax-regime-as-multiple-bills-of-law-adopted/

https://wdocs-pub.chd.lu/docs/exped/0148/197/297979.pdf

The following section of the new law is relevant (French original): 2. Modification de la règle de limitation de la déductibilité des surcoûts d’emprunt

Toujours en ce qui concerne la fiscalité des entreprises, il est également proposé de procéder à une modification technique de la règle de limitation de la déductibilité des surcoûts d’emprunt, telle que visée à l’article 168bis de la loi modifiée du 4 décembre 1967 concernant l’impôt sur le revenu. Cette modification vise à préciser le fonctionnement de la règle de limitation dans le cas spécifique des entités qui ne font pas partie d’un groupe consolidé à des fins de comptabilité financière, tout en n’étant pas considérées comme des entités autonomes aux fins de l’application de la règle de limitation de la déductibilité des surcoûts d’emprunt.

Note that PwC's 2024 industry survey on Securitisation (https://www.pwc.lu/en/securitisation/docs/securitisation-market-survey-2024.pdf) stated "Unfortunately, this year again our participants cited the uncertainty about the application of the interest limitation rules under ATAD 1 as the most obstructing factor. This remains an issue and a competitive disadvantage for Luxembourg. Unfortunately, despite some tax circular issued on this topic, some specific questions remain unclear and such uncertainty may have a negative impact on some structures. We remain optimistic that further clarification on these items by policy makers and the tax administration will be achieved soon."