Recent decision of the Administrative Court in relation to the 115 Account: What is at stake?

In a recent decision of 31 March 2022, the Luxembourg Administrative Court (the “Court”) ruled on whether contributions to the “115 Account” (capital contribution without issuance of shares) have to be taken into account when computing the acquisition price of a shareholding for the application of the Luxembourg participation exemption regime. The 115 Account is a subcategory of the equity account “share premiums and similar premiums” in the financial statements of Luxembourg companies.

Following a debate between the taxpayer and the tax authorities on whether or not the 115 Account qualified as share capital and had to be taken into account for the computation of the acquisition price of the shares, in relation to which the benefit of the participation exemption was requested, the Luxembourg Administrative Tribunal decided, in a decision of 11 May 2021, that the contributions to the 115 Account, as performed in the case at hand, could not be taken into account in order to compute the minimum acquisition price of EUR 1.2 million under the Luxembourg participation exemption regime. In its decision, the Court confirmed the first-instance decision.

The facts of the case were very specific – the 115 Account contribution was disconnected from the share acquisition. Nonetheless, from now on, the surprising and questionable conclusion of the Court should be kept in mind when the 115 Account is used.

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