AGEFI Luxembourg - juillet août 2025

AGEFI Luxembourg 34 Juillet / Août 2025 Droit / Emploi O n 30April 2025, the Luxem- bourg administrative Tribunal ( Tribunal administratif, 30 avril 2025, n° 47382 ) (the “Administra- tive Tribunal” or the “Tribunal”) was calledupon to take position onwhether an immovable property situated abroad, aswell as debt in relation with its financing, shouldbe taken into account for net wealth tax purposes. Summary of the case In the case at hand, the taxpayer par- tially owned at Polish entity (with legal characteristics similar to those of a Luxembourgish limited partnership ( société en commandite simple ). Thetaxpayerarguedforitstreatmentasatransparent entityfromaLuxembourgdirecttaxperspective (1) .Re- lyingonthispremise,thetaxpayerconsolidateditsas- sets and liabilities with those of the Polish entity to compute its unitary value. Notably included in this consolidationwere: -Areal estate property located inPoland; - Debt related to the financing of that real estate. Thisapproachandnotablythenetwealthtaxposition in relationwith the above was contested by the Lux- embourg tax authorities which notified the taxpayer inApril2017oftheirintentiontodeviatefromthe2013 tax return. Despite the taxpayer’s submission of ob- servations and explanations to the relevant tax office, the tax authorities upheld their decision to adjust the netwealthtaxposition(i.e.,disregardingtheassetand liability attributed to the Polish company). In September 2017, an administrative claim (recla- mation) was filed with the Director of the direct tax authorities ( AdministrationdesContributionsDirectes ). Furthermore, in early 2019, the tax office also chal- lenged the taxpayer’s tax return for 2014 on similar grounds, leading to the filing of a second adminis- trative claim. As the Director did not reply to either claim, the tax- payer ultimately referred thematter to theAdminis- trative Tribunal. Decision of the Tribunal In the case at stake, the Administrative Tribunal af- firmedthepositiontakenbytheLuxembourgtaxau- thorities, ruling that the asset and liability attributed to the Polish entity should not be included in the cal- culationofthetaxpayer’sunitaryvalue,basedonboth the Bewertungsgesetz (“ BewG ”) (2) and the double tax treaty concluded between Luxembourg and Poland (the “ Luxembourg-PolandDTT ”). The judges start their reasoning by acknowledging whatwasnot disputedbetween theparties, inpartic- ular the fact that the Polish entity owning the real es- tatepropertyinPolandshouldbetreatedastranspar- ent fromaLuxembourgdirect taxperspective so that the taxpayer shouldbe treated as holding the real es- tatepropertydirectly,andtheeconomiclinkbetween the property inPoland and the existingdebt. With respect to the real estate property The judges then underscored that, in accordance with §7 of the Vermögensteuergesetz (“ VStG ”) (3) the taxpayer, as a capital company resi- dent inLuxembourg, shouldbe subject tounlimited tax liability for the purposes of netwealth taxmean- ing that they should be subject to net wealth tax basedontheirworldwideoperatingwealth.Further- more, theoperatingwealthshouldbeassessed inac- cordancewith §73 to §77 of the BewG. TheTribunal further outlined that theassets of a res- identcompanyfallentirelyunderthecategoryofop- erating wealth, including operating property. Economic assets that are exempt fromnetwealth tax under either the VStG or any other laws (such as double tax treaties) should however be excluded from the perimeter of the operatingwealth, as artic- ulated in §59No 1 and §73 of the BewG. In this context, the administrative judges noted that the Luxembourg-PolandDTTprovides that: - The capital represented by immovable property owned by a resident of a Contracting State and sit- uated in the other Contracting State, may be taxed in that other State (article 23 of the Luxembourg- PolandDTT). -Furthermore,whenaLuxembourgtaxpayerreceives incomeorownsassetsthataretaxedinPoland(based on thementionedDTT), these income/assets should, in order to prevent from the risk of double taxation, be exempt from corporate tax/wealth tax in Luxem- bourg (article 24 of the Luxembourg-PolandDTT). TheAdministrativeTribunalthereforeconcludesthat, the immovable property held by the taxpayer (through the transparent Poland entity) should be taxed in Poland (country where the property is lo- cated).Theaboveshouldapplynotwithstandingthat theassetisheldviaatransparententityastheLuxem- bourg-PolandDTTdoesnotcontainanyspe- cific provision in this respect. The Tribunal concludes that based on §59No 1 and §73 of the BewG the asset under discussion should be excluded from the operating wealth of the taxpayer (as such excluded fromthe overallwealthof the taxpayer). Basedontheabove,theargumentofthe taxpayer according to which the cur- rent Luxembourg valuation law constitutesaninfringementofthe taxpayer’s freedom of establish- ment or the free movement of capital, as the property in Poland should be valued in accordance with the provisions applicable to property in Luxembourg (i.e. at its value on 1 January 1941) instead of the fair marketvalue(usedforpropertieslocatedabroad under the BewG) for net wealth tax purposes, is therefore considered not relevant by the Tribunal, sincethepropertyinquestionshouldnotbeincluded in the taxablewealth of the taxpayer. With respect to the loanfinancing the real estate Asmentionedabove,inthecaseatstake,theeconomic link between the property in Poland and the existing debt is not contested. The Tribunal acknowledges that the Luxembourg- PolandDTTdoes not explicitly exclude debts related to real estate located in Poland (solely taxable in that country) from taxpayer’s operating wealth and as such, the judges agree that this cannot serve as a legal basis for excluding those debts from their operating wealth.However,thelackofexclusionfortheseitems under the Luxembourg-Poland DTT does not auto- matically imply that the loan at issue should be in- cluded in the determination of the operating wealth of the taxpayer according to the Tribunal. Inthatregard,thejudgesareoftheviewthatthecom- bination of §62 and §74 BewG provides that debts should not be deductible if they are economically re- lated to assets that are not included in the operating wealth for thepurposes of thenetwealth tax compu- tation. Having already concluded that the real estate property was to be exempt for net wealth tax pur- poses, the Tribunal logically ruled that, based on the BewG, the loan financing it should also be excluded (i.e., not deducted fromthe unitaryvalue). Finally, for completeness, the Tribunal clarified that since the loan had been contracted exclusively to fi- nance the real estate inPoland, it should be excluded fully for the computation of the unitary value, irre- spective of whether its amount exceeded the alleged value of the asset for net wealth tax purposes: “(…) This is fundamentally different from the case in which the amount of a loan is, at the outset, in excess of the property it isintendedtofinance,regardlessofthevaluationofthisprop- ertyforwealthtaxpurposes,whichmaybedifferent.Strictly speaking, there is no excess of the loan in question over the tax-exemptvalueofthepropertyinPoland,sincethe“Neg- ative Balance” is in fact the result of a lower valuation of the property inPoland than itsmarket value, carried out by the plaintiff company on the basis of national provisions which arenot,however,automaticallyapplicabletopropertylocated abroad.Accordingtotheplaintiff’sexplanations,theloanat issuewas taken out to fully finance the real estate located in Poland the full amount of the disputed loan, which is eco- nomically related to the property inPoland.” (4) Takeaways In recent months, the administrative judges have rendered several decisions with respect to the tax treatment of debt financing. These decisions under- score the uncertainties that taxpayers encounter in this area,which is frequentlyscrutinizedby theLux- embourg tax authorities. Adding to its complexity, the case under review in- volved a transparent (partially owned) entity in Poland.Thepointregardingwhetherthetransparent entity under Polish tax law was also to be deemed tax transparent from a Luxembourg direct tax per- spective was not contested. However, the Tribunal clarified that for net wealth tax purposes, all the wealth (i.e., net asset value) of the entity should not necessarily be consolidatedwith that of the resident taxpayer.Although inprinciple capital companies in Luxembourg should be taxed on their worldwide income, some items may be exempt when they are coverednotablybyadouble tax treatyproviding for their taxation in the other contracting state. Consistentwithitspreviousdecisions (5) ,thejudgesre- called that the qualification and tax treatment of debt instruments should depend on the underlying asset such instruments are meant to finance. In the case under review, insofar as the debt was economically related to an immovable property in Poland which theTribunalruledshouldbeexemptfromnetwealth tax, the loanwas also tobedisregarded fromtheuni- taryvalue of the taxpayer according to the Tribunal. Thedecisionultimatelyemphasizesthatparticularat- tention is given to the link of the instrument with the asset funded. Since the loan was solely intended for the financing of the property, the judges considered that it is not relevant that the amount exceeds the al- legedvalue of the asset for netwealth tax purposes. Emilien LEBAS, Partner, Head of International Tax, Tax controversy & dispute resolution leader, Valentine PLATEAU, Manager, International Tax, KPMG Luxembourg 1)ThetaxtransparencyofthePolishcompanywasnotcontested inthecaseatstake. 2)ValuationLawof16October1934. 3)LuxembourgNetWealthTaxLawof16October1934 4)UnofficialEnglishtranslationoftheoriginalFrenchtextbythe authors. 5)Tribunaladministratif,26février2025,n°47358 Tax controversy series Administrative Tribunal - Judgment clarifying the treatment of debt financing foreign immovable assets for net wealth tax purposes L ’Institut de la Propriété Intellectuelle Luxem- bourg (IPIL), groupe- ment d’intérêt économique (GIE) réunissant l’État luxembourgeois – représenté par lesministères de l’Écono- mie, de l’Enseignement su- périeur et de laRecherche, ainsi que des Finances – la Chambre de Commerce et la Chambre desMétiers, a cé- lébré le jeudi 3 juillet son 10 e anniversaire au Euro- peanConventionCenter Luxembourg, en présence de 125 invités. Danssondiscoursd’ouverturede la séance académique, le ministre de l’Économie, des PME, de l’Énergie et du Tourisme, Lex Delles (photo), a salué l’engage- mentdel’IPILetremerciél’Institut pour les nombreuses actions concrètes menées au cours de la dernière décennie. Il a souligné l’importance du rôle joué par l’IPIL dans la sensibilisation et la formation des acteurs écono- miques luxembourgeois aux enjeux de la propriété intellec- tuelle, ainsi que dans le soutien à la mise en œuvre de la politique publique en lamatière. Le directeur de l’IPIL, Serge Quazzotti,aretracél’historiquede l’Institut, dont les racines remon- tentbienavantsacréationofficielle en 2014. Dès 1994, le Centre de RecherchePublicHenriTudorlan- çaituneactivitédeveilletechnolo- giquefondéesurl’exploitationdes bases de données brevets, concré- tisée par la création du Centre de VeilleTechnologique (CVT). Cette initiative pionnière a jeté les bases de ce qui deviendra, 20 ans plus tard, l’IPIL. Fort de cette dynamique initiée il y a plus de 30 ans, l’Institut est aujourd’hui reconnu comme un centre de compétences neutre et indépendant,auservicedesentre- prises, chercheurs, créateurs et du grandpublic. Un impact croissant En dix ans, l’IPIL a su répondre à une demande croissante en matière de sensibilisation, de for- mation et d’accompagnement : - 2.735 participants aux événe- ments de sensibilisation - 4.085 personnes formées via des formations, séminaires et la plate- forme eLearning -1.344séancesdecoachingindivi- duel (BoostIP) - 936 recherches brevets réalisées - 1.247 demandes traitées via le Helpdesk Avecuntotalde10.347prestations, ceschiffresillustrentconcrètement l’impact des missions de l’IPIL et la pertinence de ses actions. Des événements phares Parmi les initiatives embléma- tiques de l’Institut figurent : - La Journée luxembourgeoise de la propriété intellectuelle, confé- rence annuelle de référence - Les Afterworks de la propriété intellectuelle, format pragmatique avec tables rondes thématiques et témoignages d’entreprise - La conférence JEuPI, colloque biennaldehautniveausurlajuris- prudence européenne en pro- priété intellectuelle, reconnu au niveau international Une ouverture internationale dès les origines L’IPIL participe activement à des projets européens et collabore régulièrement avec les grandes institutions européennes et inter- nationales de la propriété intellec- tuelle,tellesquel’OfficeEuropéen des Brevets (OEB) et l’Office de l’Union européenne pour la pro- priété intellectuelle (EUIPO). Ces partenariats ont permis de renforcer la sensibilisation des PME, notamment à travers des accords de coopération, optimi- sant ainsi l’investissement public luxembourgeois. Un rôlemoteur dans la transformation de l’écosystème PI Le paysage luxembourgeois de la propriétéintellectuelleaprofondé- ment évolué en 30 ans. Grâce aux efforts conjoints de l’Office de la propriété intellectuelle du minis- tère de l’Économie et de l’IPIL, la PI est désormais mieux intégrée dans les pratiques des entreprises et des institutions dupays. Le directeur SergeQuazzotti et la présidente du conseil de gérance, Iris Depoulain, ont tenu à remer- cier les pionniers de cette aven- ture : Serge Allegrezza (directeur de l’Office de la PI en 1994), Claude Wehenkel (directeur du CRP Henri Tudor), et Lex Kaufhold(directeurdel’Officede la PI en 2014), à l’origine de la création de l’IPIL. Ils ont égale- ment exprimé leur gratitude envers les membres du GIE, les partenaires institutionnels et pro- fessionnels, ainsi que l’ensemble des collaborateurs de l’Institut, dont l’engagement a été détermi- nant dans son développement. L’IPIL, 10 ans d’engagement au service de la propriété intellectuelle ©MikeZenari