On 25 March 2026, the Luxembourg Administrative Tribunal issued a decision on the tax treatment of share premium repayments made without a formal reduction of share capital. The Tribunal held that such repayments cannot benefit from the tax-neutral treatment generally applicable to repayments of share capital.
Instead, the Tribunal characterised the repayment as income from a participation, on the basis that it constitutes a “product” allocated by reason of the shareholding. As a result, the repayment was considered subject to Luxembourg withholding tax.
While based on specific facts, the decision adopts a surprising and questionable interpretation of the law and may therefore have broader implications for future capital repayments.
In this News, our Tax Partner and Head of Transfer Pricing, Oliver R. Hoor, and our Chief Knowledge Officer, Marie Bentley, analyse the ruling and assess its consistency with the parliamentary comments relating to the relevant legal provisions.