TheLuxembourg Tax Authority updated for the third time the circular issued on 8 January 2021 (“Circular”) providing additional clarification on certain aspects of the interest deduction limitation rule (“IDLR”) laid down in Article 168bis of the Luxembourg income tax law (“LITL”).
To gain insight into the previous updates, please refer to our article of 14 September 2021.
- The grandfathering rule and the end of LIBOR
According to the grandfathering rule (Article 168bis (7) of the LITL), borrowing costs related to loans concluded before 17 June 2016 are excluded from the application of the IDLR. However, borrowing costs related to subsequent modifications to such loans are not covered by the grandfathering rule. In the second update of the Circular, the Luxembourg Tax Authority already provides for examples of what would be considered as a “subsequent modification” and what would not.
