Yesterday, the European Commission sent 2 letters of formal notice to Luxembourg relating to securitisation, one objecting to more heavy tax of foreign securitisation enterprises and another one asking Luxembourg to remove the ATAD interest rules “carve out” for EU regulated securitisation vehicles.
The European Commission decided to send a letter of formal notice to Luxembourg for taxing more heavily securitisation enterprises with taxable operations in Luxembourg whose statutory seat is in another EU or EEA Member State. The Commission considers that the legislation at issue is not compatible with the freedom of establishment of the Treaty on the Functioning of the European Union.
While no further details have been published on why the Luxembourg tax regime of securitisation companies would be discriminatory, it could be that the issue raised by the Commission is due to the fact that the Luxembourg tax provisions applicable to securitisation undertakings only apply to securitisation undertakings incorporated in Luxembourg, i.e. they would not apply to the Luxembourg permanent establishment of a securitisation entity located in a foreign jurisdiction nor to a foreign entity having its place of effective management in Luxembourg.
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