Intragroup financing in Luxembourg, structure debt, secure deductibility.
Intragroup financing organises loans and financial flows within a group through a Luxembourg company. Its robustness rests on an arm's length margin, real substance and compliance with the interest deduction limitation. FSL documents, computes and ensures compliance; legal opinions and reserved acts are coordinated with our partner lawyers and notaries.
Intragroup financing structures loans, advances and financial instruments between related entities through a Luxembourg financing company. Its taxation depends on respecting the arm's length principle, substance and the interest deduction limitation rule.
Arm's length on financing transactions: art. 56 and 56bis LIR, circular LITL no. 56/1-56bis/1 of 27 December 2016 (risk capital, margin). Interest deduction limitation: art. 168bis LIR (ATAD transposition).
Key takeaway
- A financing company must have substance and risk-bearing capital.
- The margin must be arm's length and documented (2016 circular).
- Interest deduction is capped by art. 168bis LIR (ATAD).
Who this is for
- Groups centralising financing through a Luxembourg entity
- Holdings and SOPARFIs lending to subsidiaries
- Acquisition vehicles carrying debt
- Cash pooling and group treasury companies
What we do
- Structuring of the financing company (capital, instruments)
- Arm's length margin determination and documentation
- Interest deduction limitation scoping (art. 168bis LIR)
- Substance, governance and accounting
- Transfer pricing and loan agreement coordination
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Preparation checklist
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Frequently asked questions
What is an intragroup financing company?
Is interest always deductible?
What substance for a financing company?
Must intragroup loans be documented?
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