Luxembourg Tribunal Rejects PE Claim in U.S. by “A IGF s.a.r.l.”

July 2024

The Luxembourg Administrative Tribunal ruled on an intra-group financing dispute between “A IGF s.a.r.l.” and the tax authorities regarding the recognition of a permanent establishment (PE) in the U.S. The company argued that its U.S. operations qualified as a PE under Article 5 of the Luxembourg-U.S. tax treaty, which could have impacted its taxable income allocation in Luxembourg.

The tax authorities rejected this claim, asserting that the company's U.S. presence did not meet the criteria for a PE, which requires both a fixed place of business and substantive economic activity. While “A IGF s.a.r.l.” provided evidence of a physical location and certain management functions, the court found these insufficient to establish a genuine and substantial business presence.

The Tribunal ruled in favor of the tax authorities, concluding that the company failed to satisfy the PE requirements. It also noted the absence of any binding advance ruling or official assurance that would obligate the tax authorities to accept the company’s interpretation.

As a result, the court upheld the tax assessments for the disputed years, rejecting the company’s claims.

Full Link to English Translation: https://tpcases.com/luxembourg-vs-a-igf-s-a-r-l-july-2024-administrative-court-case-no-46975-eclilutadm202446975/