Shareholder loan or account 115 contribution for a Luxembourg holding?

A shareholder loan creates a debt owed by a Luxembourg holding or special-purpose vehicle (SPV). An account 115 contribution increases equity without issuing shares. The distinction changes the investor’s repayment rights, the company’s recurring interest expense and the treatment of money paid out later.

The starting point is the use of the funds and the expected repayment. Debt can suit funding with a credible repayment profile. Account 115 can support a continuing equity need without changing the number of shares. Neither option produces an automatic tax advantage, and a company may need a combination that reflects the investment, its external financing and its owners’ agreed rights.

The balance sheet reflects different commitments

Account 115 is a Luxembourg accounting reference. The official mapping table published on eCDF, the government’s electronic platform for collecting financial data, identifies it as a contribution to equity without remuneration by securities. It is presented under equity and liabilities heading A.II, alongside share premium. It remains distinct from account 101 for subscribed capital and account 111 for share premium.

An account 115 contribution does not itself increase nominal share capital or issue additional shares. It also does not create the lender’s claim that a loan creates. A future payment out of the account requires examination of the contribution arrangements and the rules applicable to an equity payment. A date mentioned in a financial model does not establish a loan maturity.

A loan instead has contractual terms governing the principal and its repayment. Currency, maturity, interest, ranking and any security form part of those terms. Subordination to a bank lender may postpone repayment, but it needs to be reflected in the agreement rather than assumed from the shareholder relationship.

The table describes the funded company’s position. The contributor’s own accounting and tax treatment remains separate. An amount classified as equity in Luxembourg may require analysis under different rules in the investor’s jurisdiction.

The investment has to support the debt

An acquisition holding may receive cash only when a subsidiary distributes profits or when the investment is sold. Its shareholder debt therefore depends on those expected flows. The operating company’s cash cannot be treated as immediately available to the holding while disregarding its own creditors, funding conditions or distribution decisions.

The forecast needs to connect the debt with the asset that generates repayment. A bridging advance pending an identified refinancing is different from long-term funding that can only be returned if a speculative exit succeeds. Both may involve debt, but their maturity, ranking and risk cannot be priced as if they were the same instrument.

For a loan between associated enterprises, Articles 56 and 56bis of the Income Tax Law require terms consistent with the arm’s-length principle. The assessment identifies the actual transaction and comparable conditions. The borrower’s expected cash flows and repayment capacity are part of the economic circumstances to examine before selecting a rate. A rate selected without defining the financing gives little support to that assessment.

The intragroup-financing analysis addresses those terms in more detail. Where the shareholder is an individual rather than an associated enterprise, that distinction also affects the applicable analysis. An excessive interest payment can still raise a hidden-distribution question under Article 164(3).

Interest does not guarantee a tax deduction

A loan creates a possible interest expense. Account 115 creates no equivalent contractual interest expense merely because funds have been contributed. The difference matters only after the company’s deduction rules have been applied.

Expenses connected with exempt income raise Articles 45 and 166(5). In particular, interest funding a participation cannot be assumed to reduce all the holding’s taxable income while income from that participation is exempt. The exempt income received, the expenses connected with it and the relevant period need to be assessed together.

Article 168bis then limits otherwise deductible exceeding borrowing costs. Its general limit is the higher of 30% of tax EBITDA and EUR 3 million, subject to the provision’s scope, exclusions and other conditions. Tax EBITDA starts from the company’s total net income, before special deductions such as loss carryforwards. It adds back exceeding borrowing costs, tax depreciation and write-downs, and it excludes exempt income and related expenses. A holding’s large exempt dividend therefore does not automatically create borrowing-cost deduction capacity.

The interest-limitation rules concern exceeding borrowing costs as defined by the legislation, rather than a simple cap on every interest payment. The EUR 3 million amount is not a general safe harbour for shareholder lending, excessive pricing or expenses excluded under other provisions.

Account 115 does not establish a participation-exemption threshold

The funded company may receive the same cash from a capital subscription and an account 115 contribution, but the investor’s participation-exemption analysis can differ.

In its judgment of 31 March 2022, case 46067C, the Administrative Court considered the EUR 1.2 million acquisition-cost threshold for the exemption and refund of dividend withholding under Articles 147 and 149. The shareholder’s percentage was below 10%, and the claim relied on account 115 funding to meet the alternative cost threshold.

The Court held that the contribution, outside share capital and without additional shares or an increase in their nominal value, lacked the required connection to the participation’s acquisition cost for that threshold. It rejected the appeal and upheld the refusal of the withholding-tax refund. The judgment makes the distinction relevant where a shareholder relies on acquisition cost rather than the percentage test.

The case does not mean that account 115 ceases to be equity in the company’s accounts. Nor does simply linking a contribution to a shareholder in an agreement establish that every tax regime will count it as share acquisition cost. A financing plan relying on an exemption needs to identify the exact provision and the amount that qualifies under it. The broader holding-company regime has conditions beyond the funding balance.

The eventual payment needs its own tax analysis

Repayment of genuine loan principal is different from payment of interest. The records need to distinguish those amounts, including accrued interest that has been added to the loan. Calling the entire payment principal does not remove the tax treatment of an interest component.

Ordinary interest on a conventional loan is not treated in the same way as a dividend under Luxembourg’s dividend-withholding provisions. Profit-linked instruments, hidden distributions and other withholding regimes require separate examination. A shareholder-loan label alone does not establish the classification of every return paid to the investor.

An equity payment requires equal care. The 25 March 2026 judgment, case 45846a, concerns share premium, rather than a general decision on every account 115 contribution. The Administrative Tribunal held that a standalone premium repayment without a corresponding capital reduction fell outside Article 97(3)(b) and within participation income subject to withholding. The first-instance ruling should not be turned into an unqualified rule for all account 115 payments. It does show why a premium or equity balance cannot establish a tax-free repayment by itself.

Parliamentary question 4199 of 5 June 2026 announced an appeal, and ATOZ’s June 2026 publication reported that it had been filed. In his reply of 6 July 2026, the Minister of Finance stated that it is not for the government to comment on the outcome of a pending case. None of these publications establishes the current status or the outcome of the appeal. Any subsequent appellate decision needs to be checked when assessing a payment.

The distinction between capital reductions, premium payments and share redemptions becomes relevant before the investor’s return is approved. The recipient’s residence and eligibility for relief also matter.

The funding remains visible at each year-end

A loan requires reconciliation of principal movements, accrued interest, payments and amendments. Account 115 requires a traceable equity movement from the contribution decision through receipt of the funds to their later use or distribution. The agreement, bank movement and ledger should describe the same instrument.

That record continues through the SPV’s annual accounting and tax cycle. It also supports the next funding round or disposal, when the distinction between debt repayment and amounts belonging to the shareholders can directly affect the proceeds available. The useful funding choice is the one whose rights and expected cash flows remain coherent from investment through exit.