By a decision of 17 May 2022, the Higher Administrative Court (Cour administrative) confirmed judgments of the Lower Administrative Court (Tribunal administratif) of 15 September 2021 that overturned a decision rendered by the Director of the Direct Tax Administration (Administration des Contributions Directes) ("DTA").
The cases concerned two private wealth management companies (“SPFs”) which had subscribed to bonds issued by other Luxembourg companies. The DTA considered that by subscribing to these bonds, the SPFs were granting remunerated loans to other companies and hence carrying out a commercial activity allegedly prohibited to SPFs by law. In order to verify whether the conditions to benefit from the SPF's tax-exempt status were met, the DTA required the two SPFs to submit corporate income tax returns. Both SPFs had lodged an appeal against the decisions of the DTA to try to force them to submit tax returns. The appeal finally ended up before the Higher Administrative Court, which confirmed that the DTA is not competent to control SPFs.
In its decisions, the Higher Administrative Court recalls the provisions of the SPF law dated 11 May 2007 (“SPF Law”). According to the SPF Law, the Luxembourg Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA) (“AEDT”) is the competent authority to control SPFs, under the authority of its director. Only the AEDT’s Director can/may, following a procedure organized by the SPF Law, pronounce the withdrawal of the SPF status from a company that no longer meets the conditions set out in the SPF Law. It is worth mentioning that such withdrawal cannot be retroactive. According to the Higher Administrative Court, the clear provisions of the SPF Law exclude any intervention by the DTA in the control of SPFs. Should the DTA have suspicions as to whether the conditions of the SPF Law are met, the sole option is to communicate its suspicions to the AEDT on the basis of the law on inter-administrative cooperation and request the latter to verify the fulfilment of the SPF Law conditions. In the case at hand, the Higher Administrative Court noted that there had been an exchange between the two administrations and that this exchange had led to a decision by the Director of the AEDT confirming that the status of the two SPFs was to be maintained.
The Higher Administrative Court also recalled that the SPF Law qualifies as a special law and that, according to the adage lex specialis derogat legi generali, the DTA cannot invoke its competences resulting from the Luxembourg Income Tax Act or the Luxembourg Abgabenordnung to justify a control of Luxembourg SPFs.
Finally, the Higher Administrative Court also awarded a procedural indemnity to the SPFs to compensate any incurred costs resulting from a dispute between two administrations on their respective competences.