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ARTICLE · 14 JUNE 2024

New Case Law On Abusive Use Of A Share Class Redemption

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On 4 June 2024, the Administrative Court of Luxembourg issued its awaited final judgment in a case dealing with the application of the general anti-abuse rule (GAAR)...

LuxembourgTax
Peter Adriaansen
Peter Adriaansen
Peter Moons
Peter Moons
Pierre-Antoine Klethi
Pierre-Antoine Klethi
Kévin Emeraux
Kévin Emeraux

On 4 June 2024, the Administrative Court of Luxembourg issued its awaited final judgment in a case dealing with the application of the general anti-abuse rule (GAAR) to the redemption by a Luxembourg company of two share classes. The court confirmed that the reclassification of the share capital into 20 classes with no different economic rights and the redemption of two share classes shortly thereafter was abusive in the case at hand. This outcome is another reminder of that there are certain limitations to share class redemptions as repatriation tool.

Background

Whereas dividends are in principle subject to 15% withholding tax in Luxembourg, liquidation proceeds are not. As soon to be codified into law (see our tax newsletter on the bill of law that was recently submitted to parliament), the redemption with cancellation of a class of shares can qualify as a shares sale transaction and/or as a partial liquidation, in which case the transaction does not give rise to

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