In this ATOZ Report, Tax Partner, Oliver R. Hoor, examines the tax classification of interest-free loans in Luxembourg following a recent decision by the Luxembourg Administrative Court.
On 17 April 2025, the Luxembourg Administrative Court (“the Court”) ruled on the classification and tax treatment of interest-free loans (“IFL”) under Luxembourg tax law. Although this case is based on an unusual set of circumstances, the decision creates significant uncertainty regarding the classification of IFLs, and more broadly, regarding the classification of financing instruments in general.
This Report provides an overview of the facts of the case and the decisions of the Luxembourgish courts, and analyses the classification of IFLs for Luxembourgish tax purposes.