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Friday, 15 July 2016

Luxembourg Administrative Court confirms applicability of Advanced Tax Agreement

On 12 July 2016 the Luxembourg Administrative Court, the highest court in administrative matters in Luxembourg, confirmed the decision of the Luxembourg Administrative Tribunal of 16 December 2015, on the scope and legal value of an advanced tax agreement “ATA”, or “advanced tax ruling”) issued by the Luxembourg direct tax authorities to a Luxembourg taxpayer (case no. 37448C).

The Administrative Court confirmed that, despite the absence (at the time of the claim) of any laws or regulations governing ATAs, the legal value of said agreements can be determined pursuant to the general legal principle of legitimate expectations and legal certainty.

In this regard the Administrative Court confirmed that where the direct tax authorities “gave assurances or made a promise”, said authorities must “be held to honor the expectations created”.

The Administrative Court confirmed the position of the Administrative Tribunal that to be valid, ATAs must fulfil certain criteria. An ATA (1) must be set in writing in a clear and comprehensive way in order to put the administration in a position to decide in full knowledge of the facts; (2) must originate from a competent official who, through his decision, (3) intends to bind the direct tax administration without restrictions or reserves, and (4) the content of which must have a decisive influence on the taxpayer.

The above conditions were previously set out in a decision held by the Administrative Tribunal on 14 February 2011, and confirmed by the Administrative Court on 27 July 20111.

In its decision of 12 July 2016, the Administrative Court further rejected the argument of the tax authorities on the characterisation of the structure as an abuse of law. In particular, while the Administrative Court acknowledged that the structuring was intended to substantially reduce the company’s taxable basis, the Court stressed that the tax authorities, having unreservedly accepted the ATA, could not reverse its earlier decision ex post by qualifying the structure as an abuse of law.

The decision of 12 July 2016 of the highest administrative court in Luxembourg reinforces the principle of legal certainty and legitimate expectations in relation with ATAs issued by the Luxembourg direct tax authorities.

1 Administrative Tribunal, 14 February 2011, case n°26812 (Pas. adm, V° Impôts, n° 541), confirmed in appeal by a decision of 27 July 2011, case n° 28115C.

If you would like more information about this issue, then please contact:
Jean-Luc Dascotte - Partner (
Jonathan Norman - Senior Associate (


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