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In brief

On 1 December 2020, the Luxembourg tax authorities issued Circular L.I.R. n° 147/2, 166/2 et Eval. n° 63 (“Circular“) regarding non-eligibility of Gibraltar companies for the provisions of Directive 2011/96/EU (parent-subsidiary directive).


The Circular makes direct reference to the ECJ case law dated 2 April 2020, GVC Services (read our tax alerts dated 13 November 2019 and 14 April 2020 in this respect).

The Circular mentions that an administrative tolerance will apply until 31 December 2020 to all dividends derived by Luxembourg companies from Gibraltar companies (tax exemption for corporate income tax and municipal business tax purposes) and dividends distributed by Luxembourg companies to their Gibraltarian shareholders (withholding tax exemption).

From 1 January 2021, Gibraltarian share capital companies will no longer be considered covered by Directive 2011/96/EU and will not be eligible for the Luxembourg participation exemption regime covering EU companies, in particular:

  • The dividend tax exemption will not be applicable in Luxembourg, based on article 166 (2) 1 LITL.
  • The withholding tax exemption will not be applicable in Luxembourg, based on article 147 (2) e LITL.
  • The net worth tax exemption also will not apply, based on §60 (2) 1 BewG.

However, the Circular clarifies that the dividend tax exemption and net worth tax exemption may still apply if the Gibraltarian share capital companies meet the Luxembourg subject-to-tax test (i.e., the companies are subject to tax in Gibraltar at a tax rate of at least 8.5% computed on a similar basis to how it would be in Luxembourg). Such provisions are foreseen in article 166 (2) 3 LITL and §60 (2) 3 BewG, respectively.

Our Baker McKenzie Luxembourg tax experts would be happy to assist you should you require any further information.


Sergei Zhestkov is a partner in the Moscow office of Baker McKenzie and a licensed Russian advocate. He is experienced in advising multinational corporate and private clients on the broad scope of tax and asset protection issues, including international tax and trust planning and structuring.


Kirill Vikulov is a partner in the Tax law practice group of Baker McKenzie’s Moscow Office. He has extensive experience in advising Russian and multinational clients on a wide range of complex tax issues, including M&A deals, joint ventures, international holding and financing structures, and various financial and capital markets transactions. Prior to joining Baker McKenzie in 2007, Kirill worked as a tax consultant in the international tax structuring department of an international audit company. Kirill is also a visiting professor of international tax law at MGIMO.


Maxim Kalinin serves as managing partner of Baker & McKenzie’s St. Petersburg office and head of the Mergers & Acquisitions, Corporate, Real Estate & Construction and Employment practice groups. He was named a European legal expert in Russia by European Legal Experts 2008, and was recognized by Chambers Europe "for his expertise in M&A and real estate work". He is also cited by Legal 500, Who’s Who Legal 2009, The International Who’s Who of Real Estate Lawyers 2008 and the Private Equity Handbook 2007/2008 for his corporate and real estate work