Managing substance in pandemic times – Thinking beyond the COVID-19 crisis

19 août 2020 par
vanessa Icardi Serrami

Luxembourg is a prime holding location and a major hub for the structuring of Alternative Investments in and through Europe. As a principle, Luxembourg companies need to have appropriate substance for the activities performed in order to ensure Luxembourg tax residency and to avoid the application of anti-abuse legislation under foreign tax law or applicable tax treaties. This article analyses potential issues relating to the management of substance during the COVID-19 crisis and provides practical recommendations for taxpayers.  

1. Introduction

The outbreak of COVID-19 has resulted in an unprecedented crisis that requires the adoption of radical measures by governments to limit the uncontrolled spread of the virus among the population. Many States in Europe and the rest of the world have announced travel restrictions and the requirement of “social distancing”. 

As part of a series of measures to cope with the COVID-19 situation, the Luxembourg government provides flexibility with respect to the holding of shareholder and board of director meetings without the need of physical presence.  However, all the measures adopted in Luxembourg and abroad may have a very practical impact on the substance of Luxembourg companies. 

It should also be considered that depending on how the current COVID-19 pandemic develops, it cannot be excluded that this situation may last for several months. Given that governments follow different strategies to deal with the containment and management of the disease, it can further not be excluded that some jurisdictions will experience a more severe and lasting situation until COVID-19 is under control, resulting in extended travel restrictions.


Extrait d’un article de la Revue de Droit Fiscal #7 paru en juin 2020. 

Par Oliver R. Hoor, Tax Partner, Atoz Tax Advisers