LUXEMBOURG Law and Practice Contributed by: Vassiliyan Zanev and Natalja Taillefer, Loyens & Loeff Luxembourg S.à r.l.
7.2 Taxes on Profit A securitisation company is a regular taxable entity liable for corporate income tax and munic - ipal business tax on its income. However, com - mitments to investors are deductible from its tax base, resulting in the company being virtually tax neutral. An attention point, though, arises where the securitisation company earns taxable income other than interest income (eg, gains on dis - counted/distressed debt): in such case, the deductibility of interest might be capped under the interest deduction limitation rule (IDLR), which may cause tax leakage. As of 2025, an additional IDLR exemption applies to SPEs that form a “single entity group”; it works similarly to the group ratio exemption.” While the anti-hybrid rules are generally not expected to affect securitisation companies, their impact should still be monitored on a case- by-case basis. A securitisation undertaking in the form of a tax transparent entity is not liable for corporate income tax and, provided it does not conduct a business (which it should normally not), also not liable for municipal business tax. 7.3 Withholding Taxes Income received by a securitisation undertaking may be subject to withholding tax in the source country. A Luxembourg securitisation company (contrary to a tax transparent entity) qualifies as resident for tax treaty purposes. Whether it is effectively eligible to treaty benefits will depend on the per - spective of the source jurisdiction.
There is, in principle, no Luxembourg withhold - ing tax on interest payments made by an SPE. 7.4 Other Taxes Management services provided to a securiti - sation undertaking benefit from a VAT exemp - tion and VAT leakage is therefore reduced to a minimum. If they are specific and essential to the management of the securitisation undertak - ing, collateral management fees and investment advisory fees may be considered to be covered by this exemption. Subscription, underwriting and placement fees may also be VAT exempt, based on the general exemption of fees on the negotiation of securities. A securitisation company qualifies, per se, as a VAT-taxable person in Luxembourg. As a result, the securitisation company must register for VAT if it receives services from non-Luxembourg ser - vice suppliers in order for it to self-assess the Luxembourg VAT (in the absence of a general exemption for such services). A securitisation company is liable for minimum net wealth tax, which in the majority of cases amounts to EUR4,815. 7.5 Obtaining Legal Opinions Tax opinions are rarely requested in the context of a securitisation transaction. Topics covered would relate to the income tax and net wealth tax position of the SPE, and possibly the VAT position. Assumptions and qualifications would then notably cover (i) the nature of income of the SPE, (ii) the ongoing compliance of the SPE with all of its obligations under the securitisation law and (iii) an exclusion of abuse of law and EU state aid law considerations.
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