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The Council Directive 2016/1164 of 12 July 2016, known as Anti-Tax Avoidance Directive (ATAD), has laid down rules against tax avoidance practices that directly affect the functioning of the internal market. ATAD has been implemented in Luxembourg by the Law of 21 December 2018. In particular, article 168bis has been introduced in the Luxembourg Income Tax Law (LITL). On 8 January 2021, the Luxembourg tax administration has published a circular (the “Circular”) giving definitions and clarifying certain aspects of article 168bis LITL.
What is the interest limitation rule?
Under article 168bis LITL, tax deductions of exceeding borrowing cost are limited to 30% of the fiscal EBITDA (i.e., Earnings Before Interest, Tax, Depreciation and...
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