An analysis from ATOZ Tax Advisers, Taxand Luxembourg
A recent Luxembourg Administrative Tribunal decision has ruled that repaying share premium without a corresponding reduction in share capital constitutes taxable income from capital and is therefore, in principle, subject to Luxembourg withholding tax. The ruling could have significant implications for the tax treatment of capital repayments by Luxembourg companies.
However, the decision has proved controversial. Critics argue it places greater weight on legal form than economic substance, and the case has already been appealed to the Administrative Court.
In the latest ATOZ Report, Oliver R. Hoor and Marie Bentley from our member firm ATOZ Tax Advisers examine the decision and provide clarity on the tax implications of repaying capital, which you can read here.