On 6 June 2025, the Lower Administrative Court (Tribunal administratif) issued two similar judgments in cases n° 49747 and 49749, rejecting the appeals lodged by a Luxembourg limited partnership (société en commandite simple) against decisions of the director of the tax authorities and confirming the tax assessments issued to them.
Background
In these cases, the question which arose before the Lower Administrative Court was whether or not a limited partnership set up to acquire, finance, and distribute a film production was to be regarded as conducting a commercial activity within the meaning of Article 14 of the Luxembourg income tax law dated 4th December 1967 (the “LITL”), making it subject to municipal business tax.
The limited partnership claimed that its operations were limited to passive asset holding and that all production and distribution activities had been outsourced. It further argued that it operated similarly to an alternative investment funds (AIFs) and should therefore not be treated as a commercial entity under Article 14 of the LITL.
The Lower Administrative Court, however, upheld the tax authorities’ position. It found that the limited partnership had engaged in structured and active steps to produce and exploit a film, including entering into financing and production agreements, and assigning distribution rights for compensation. These actions, although focused on a single film, demonstrated an intention to generate profit and participate in the general economic life.
The judges concluded that the company met all the criteria of a commercial enterprise: independence, profit motive, permanence, and participation in the general economic life. The fact that revenues were ultimately distributed to investors did not negate the commercial nature of the activities at the entity level.
Interestingly the Administrative Court in particularly ruled, by reference to German case law and legal doctrine, that, in case of doubt on the commercial nature of an activity, it is decisive to assess whether, in the public’s opinion (Verkehrsanschauung), the activity in question constitutes a commercial activity and goes beyond the mere management of private wealth.
Takeaways
These decisions clarify that a dedicated special purpose vehicle (SPV), even for a single project, may be deemed to carry out commercial activities and thus be liable for municipal business tax.
Share on
