Luxembourg Tax Authorities issue guidance on the “equity escape clause” under interest limitation rules

Executive summary

On 2 June 2021, the Luxembourg Tax Authorities updated the Circular originally issued on 8 January 2021¹ clarifying certain technical aspects of the interest limitation rules introduced in the Luxembourg legislation by law in 2018 (the Law). The Law implements the European Union (EU) Anti-Tax Avoidance Directive 2016/1164 (2016) (ATAD).² These rules limit the deductibility of taxpayers’ borrowing costs to the higher of 30% of taxable EBITDA (Earnings (taxable…