Decision of the Luxembourg Administrative Court, No. 39193C, 23
November 2017
In 2008, a Luxembourg resident company redeemed its own shares,
representing the balance of the shares owned by a shareholder. In
2012, the share capital of the company was reduced to cancel the
redeemed shares. The Luxembourg tax authorities considered that the
redemption by the company of the participation of a shareholder not
followed by the immediate cancellation of such shares should not be
treated as a partial liquidation of the company within the meaning
of Article 101 of the Luxembourg Income Tax Law
("LITL") and should be subject to the
dividend withholding tax at a rate of 15%.
Applying an economic approach, the Luxembourg Administrative
Court held that the net proceeds received by a shareholder upon the
redemption by the company of all or part of his/her shares without
a corresponding cancellation of the shares so redeemed should not
qualify as income from capital (i.e.
