Luxembourg in International Tax by Schmitz Marc;Warner Philip J.;

Author:Schmitz, Marc;Warner, Philip J.;
Language: eng
Format: epub
Publisher: IBFD Publications USA, Incorporated
Published: 2015-08-15T00:00:00+00:00

(c) Associated companies

According to the Circular, two companies are considered associated companies:

… if one of them participates directly or indirectly in the management, control or the capital of the other, or if the same persons participate directly or indirectly in the management, control or the capital of both companies.

This definition is the same as the definition in article 9 of the OECD Model (2010), and as of January 2015 can also be found in the reworded text of article 56 of the LIR dealing with the arm’s length principle (see section 5.2. for more details).

Since the first Circular no. 164/2 only applies to companies lending to associated enterprises, this implies that banks and other financial institutions that provide loans to third parties are clearly excluded, even if such loans are funded by deposits and loan payables. By contrast, in-house banks, i.e. financing companies that act as banks within a group of companies, are not, as such, excluded from the scope of the Circular. Nevertheless, they would have to meet the general criteria in order to be covered by the Circular, such as being predominantly engaged in debt-funded financing activities.

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