In the last issue of Agefi, I comment a recent judgment dated 23 September 2022 in which the Luxembourg administrative tribunal requalified an interest free loan (IFL) into a disguised capital contribution (in the light of specific features of the IFL, e.g. a limited recourse provision), based on the substance over form principle / economic approach (“Wirtschaftliche Betrachtungsweise”). As a result, the judges denied the deductibility of the notional interest on the IFL.
This case gives me also the opportunity to compare the Belgian and Luxembourg approaches to interest free loans in an intragroup context (tax implications at the level of the borrower). It appears that Luxembourg tends to be far more generous (by allowing a notional interest deduction at the level of the borrower under Art. 56 LIR) than Belgium (where a fictious at arm’s length interest is considered as a “minimal taxable basis” of the borrower under Art. 206/3 and 207/2 BITC).
Read also the article in Agefi
