Luxembourg: Proposal to amend interest limitation rules, to capture EU securitization vehicles

Response to an infringement proceeding launched by the European Commission

To capture EU securitization vehicles

The Luxembourg Ministry of Finance on 9 March 2022 filed a bill that would amend the scope of Luxembourg's interest limitation rules.

This bill is a response to an infringement proceeding launched by the European Commission (EC) with respect to an exemption currently available for securitization vehicles (SVs). The EC position is that the exemption from the Luxembourg interest limitation rules available for certain SVs is beyond the allowed exemptions under an EU directive (ATAD 1).

Luxembourg thus proposes to amend the interest limitation rules under article 168bis of Luxembourg income tax law, to exclude these SVs from the definition of “financial undertaking” as of financial years starting on or after 1 January 2023. As a consequence, these SVs would be fully subject to interest limitation rules, and the deduction of net interest expenses (i.e., the amount of interest expense exceeding the interest income) would be limited up to the greater of 30% of tax EBITDA (earnings before interest, taxes, depreciation, and amortization) or €3 million.

Read a March 2022 report prepared by the KPMG member firm in Luxembourg


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