Do Verbal Confirmations Have Any Binding Effect On The Tax Authorities? A Recent Judgement Provides The Answer

OUR INSIGHTS AT A GLANCE

• The Luxembourg Administrative Tribunal ruled on the potential binding effect of verbal comments of the Luxembourg tax authorities, clarified under which conditions one may consider that a binding agreement has been reached and concluded that there was no binding effect.
• The Tribunal also analysed whether equity tainted loans had to be considered as an equity investment in the subsidiary or as a debt. In this context, the decision clarifies the well-established economic / substance over form approach in tax matters.

In a decision of 13 December 2018, the Luxembourg Administrative Tribunal ruled on the potential binding effect of verbal comments of the Luxembourg tax authorities regarding the tax qualification (as equity vs. debt) of equity tainted loans ("ETL") granted by a Luxembourg corporate taxpayer to its Luxembourg subsidiaries.