Debt Finance 2026 Comparisons

Luxembourg has always been a prime jurisdiction for debt financing. Its debt finance market has remained active over the past year and has shown a marked shift from pure bank lending towards private credit and fund-based structures, with capital markets and securitisation remaining significant complementary channels.

Traditional bank acquisition and corporate finance activity has become more selective in light of higher interest rates, inflation and geopolitical uncertainty, with a stronger focus on refinancings, covenant resets and maturity extensions than on large volumes of new money transactions. In parallel, there has been continued growth in sustainable and green bond listings through the Luxembourg Green Exchange, as well as in the use and sophistication of debt funds.

As expected by market participants, since late 2025 and into 2026, new transactions and deal flow have gradually started to pick up again.

Luxembourg is an onshore financial centre with a strong international reputation, recognised for both its stock exchange and its position as a leading domicile for investment funds. Its unique characteristics – such as bankruptcy-remote enforcement of collateral granted over Luxembourg companies, and an innovative, world’s-first platform dedicated exclusively to sustainable finance – have attracted leading domestic, European and global banks, investment funds, debt funds and a wide range of other lending and investment platforms that choose to operate, invest, build their client base and list securities in the country.

Local banks remain central for relationship-driven lending, particularly to domestic corporates and sponsors. They provide deep knowledge of local credit risk, access to deposit-funded liquidity and the ability to provide integrated products.

International banks lead large-cap, cross-border and syndicated transactions. They contribute sophisticated structuring skills, underwriting and distribution capabilities, and the infrastructure to arrange and coordinate complex, multi-jurisdictional capital structures.

Direct lenders and debt funds (which have become increasingly popular as an alternative to banks in the last couple of years) have emerged as both competitors and complementary partners to traditional lenders, especially in sponsor-driven and mid-market transactions. They typically provide faster and more certain execution, higher leverage and tailored covenant packages, in return for enhanced pricing and fees.

The unstable geopolitical situation in Eastern Europe and in the Middle East, as well as inflation and higher global interest rates, have affected the Luxembourg market, particularly the volume and frequency of new financing transactions. However, the market has remained resilient and active. Since the end of 2025, new money transactions have started to recover (see 1.1 Debt Finance Market Performance), and this trend is expected to endure throughout 2026.

Luxembourg’s debt finance market is broad, with special purpose vehicles (SPVs), securitisation vehicles and fund structures commonly used in international debt financing.

While Luxembourg tends not to be a destination for real estate assets due to its small size, its SPVs are often used as property companies for cross-border real estate investments. Acquisition and leveraged finance represent a major part of the market, and SPVs are also widely used in cross-border M&A and leveraged buyouts. 

Luxembourg is the second-largest fund centre in the world, the leading EU domicile for undertakings for collective investment in transferable securities funds (UCITS) and alternative investment funds (AIFs), and one of the two leading securitisation hubs in Europe. Consequently, fund finance and securitisation are among the country’s most active debt segments.

Luxembourg is a premier European venue for international bond issuance and listing. Bond documentation has traditionally been governed by English and New York law, with Luxembourg law also chosen, by EU institutions also, on account of its flexibility. Luxembourg law permits the disapplication of local provisions relating to bond issuance, and allows a company to issue bonds under a foreign law. Lastly, Luxembourg law has recently broadened the spectrum of the types of companies that are permitted to issue bonds.

The Luxembourg market has more imported foreign financing structures than purely domestic products. The main bank loan facilities are based on Loan Market Association (LMA) or Loan Syndication and Trading Association (LSTA) templates.

Bank loans and debt securities used by Luxembourg entities are generally governed by foreign law. Luxembourg law governs: (i) the corporate capacity and authorisations of borrowers/issuers and guarantors; (ii) the security interests created over Luxembourg assets under the Law of 5 August 2005 on financial collateral arrangements (“the Financial Collateral Law”) to secure the obligations of borrowers/issuers under primary documentation; (iii) insolvency and reorganisation proceedings applicable to Luxembourg entities; and (iv) note terms where bonds are issued by Luxembourg issuers.

There is no structural bias toward either bank loans or debt securities from the perspective of Luxembourg law. The choice between syndicated bank loans and debt securities in the country is influenced less by domestic law than by regulatory, tax and listing considerations, as well as by the investor universe, desired covenant flexibility and transaction size and profile.

Structures involving Luxembourg entities are adapted to the specificities of each transaction. A typical structure is the so-called “double LuxCo”, where two Luxembourg entities are included in the financing, with one Luxembourg entity (LuxCo 1) holding the entire share capital of the other (LuxCo 2). A pledge is typically granted over the share capital of LuxCo 2, allowing the lenders, on enforcement, to seize control of LuxCo 2 (and thereby, indirectly, the operating group).

Typically, in financings, a Luxembourg vehicle will partially meet its financing needs by benefitting from internal financing by its parent or other members of its group. The rest of its funding needs will be met via a loan from external lenders or through the issuance of debt securities by the Luxembourg vehicle. Loan-financing documentation can take various forms, depending on factors such as the specific needs of the borrowers and lenders and market conditions. Senior loans granted by international banks, as well as payment-in-kind loans and lien loans, are commonly used.

The financial position of the borrower/sponsor and, by consequence, the latter’s ability to repay the loan, play a significant role in shaping the terms of a bank loan facility agreement. Where the sponsor/borrower is financially strong and the bank’s risk of non repayment diminishes, fewer covenants, representations and warranties will be included, and a more lenient loan-to-value ratio arranged. Other provisions, such as commitment fees and control provisions, would tend to be more extensive. In cases where a fund is part of the financing structure, additional covenants, representations and warranties will be added, tailored to the structure of the fund and to any applicable regulatory requirements.

Terms dealing with insolvency and local reorganisation proceedings are typically reflected in cross-border documentation where such proceedings are not subject to Luxembourg law, since Luxembourg may apply different criteria within this context. In financings where cross-stream and/or upstream guarantees are to be given by Luxembourg entities, guarantee limitation language will also be added.

Luxembourg finance structures typically involve holding companies whose main assets consist of bank accounts, intragroup receivables and holding participations in other Luxembourg entities. The most common forms of security taken over these assets are pledges, as well as assignments and transfers of ownership by way of security; with respect to real estate, security is usually created by way of mortgages.

The Financial Collateral Law is the main piece of legislation relating to debt financing. It creates a robust framework and provides for three types of security covering: (i) transfer of ownership by way of security (transfert de propriété à titre de garantie); (ii) repurchase agreements (mise en pension); and (iii) a pledge (gage) over collateral. Securities governed by the law offer a number of attractive features for both debtors and creditors, but particularly for creditors. These include a very wide scope of application (as financial collateral has the broadest possible meaning under the Financial Collateral Law); contractual flexibility afforded to the parties to regulate their respective rights and obligations; straightforward, time and cost-efficient perfection requirements and enforcement mechanisms; and the right to enforce independently from the bankruptcy or insolvency of the pledgor.

Pledges are the most common collateral security in financing transactions and are usually created over shares, accounts, and receivables.

Pledge Over Accounts

Pledges can be created over accounts held by a person (natural or legal, irrespective of nationality or registered residence) with a bank located in Luxembourg (the account bank). The pledge accounts can be blocked, meaning that, during the term of the underlying pledge agreement, the pledgor will not be allowed to operate the accounts, or unblocked, meaning that, from the moment the pledge is created and until the occurrence of an enforcement event (as provided in the pledge agreement), the pledgor is able to freely operate the accounts. Pledges over accounts are perfected by sending a notice to the account bank informing it of the pledge. The account bank then records the pledge in their register and provides an acknowledgment confirming that it has registered the pledge (in the case of blocked accounts it also confirms that it will not follow any instructions from the pledgor in relation to the pledged accounts).

Pledge Over Shares

The shares (including any existing and future ones) over a Luxembourg entity can be pledged by its shareholders who will act as pledgors under the relevant share pledge agreement. The pledge needs to be recorded by the management board of the company whose shares have been pledged in its share register for the pledge to be considered perfected.

Pledge Over Receivables

A pledge over receivables also forms part of a typical Luxembourg security package, and generally concerns receivables from intragroup loan agreements, although other forms of receivables (eg, insurance claims) can also be pledged. There are no specific perfection requirements for pledges over receivables, but the debtor owing the receivables should be aware of the existence of the pledge. This is commonly tackled by adding the debtor as a party to the agreement. Alternatively, a notice must be sent to the debtor of the receivables informing them of the pledge.

The Financial Collateral Law recognises security trustee arrangements and provides that the beneficiaries of financial collateral can designate a person – ie, a security agent – to hold such collateral on their behalf, without the security agent needing to own any secured debt, so that a parallel debt mechanism is redundant.

Although the concept of trust is not, per se, recognised under Luxembourg law, trust arrangements under foreign law are recognised there under the Law of 27 July 2003 on trusts and fiduciary contracts which ratified the Hague Convention of 1 July 1985 on the law applicable to trusts and on their recognition (the Hague Trusts Convention).

Securities and guarantees, including upstream securities and guarantees, can be given by a Luxembourg company provided that the criteria to satisfy the concepts of corporate power and corporate benefit are met.

The security or guarantee must fall within the corporate power of the company. The corporate object of a company and any limits thereof are dictated by the company’s constitutional documents (ie, its articles of association, and any applicable shareholders agreement, joint venture agreement, limited partnership agreement, etc, depending on the type of company). Luxembourg law does not impose substantial constraints on a company’s corporate power to grant securities or guarantees, although these must be given for a profit (whether monetary, non-monetary, direct or indirect, actual or reasonably expected). A company thus has the power to grant a security or guarantee if permitted by its constitutional documents and profit (of a sort) will be gained. In Luxembourg, even if a company grants a security or guarantee outside its corporate power (ultra vires) but the security or guarantee was validly executed in accordance with the company’s constitutional documents, it is still binding on the company (unlike in many common law jurisdictions).

The company must always act for its corporate benefit (intérêt social), ie, for its own benefit as an ongoing concern. Whether an action is for the corporate benefit of a company requires a factual assessment of the specificities of the situation, to be performed by the management board of the company which is vested with the authority to take decisions on the entity’s behalf. As a general principle, if the company receives adequate remuneration for the transaction pursuant to which the security or guarantee is provided, corporate benefit can be established. A company granting an upstream security or guarantee is also deemed to be acting in its corporate interest if granting such is in the interests of the group of companies to which it belongs and if certain conditions are met.

Guidance is derived from French and Belgian case law, as the concept of “group interest” is not expressly defined in Luxembourg law. According to case law, granting an upstream security or guarantee is justified if: (i) it is authorised by the company’s constitutional documents; (ii) the proposed action is justified on the basis of a common economic, social, or financial policy applicable throughout the entire group of companies; or (iii) the guarantee or security interest is not without consideration or does not break up the balance between the undertakings of the various group companies; and (iv) the obligations arising out of the proposed action must not exceed the financial means of the companies concerned.

The management body, within the resolutions approving the upstream security or guarantee, will set down the rationale and how the above conditions are met.

In Luxembourg, financial assistance rules apply to certain forms of entities, such as corporate partnerships limited by shares (sociétés en commandite par actions – SCAs), public limited liability companies (sociétés anonymes – SAs)and sociétés anonymes simplifiées – SASs). These companies may only advance funds, make loans, grant security or give guarantees for the acquisition of their own shares by a third party if a statutory “whitewash” procedure is complied with. This requires, among other things, that the board ensures the transaction is in the company’s corporate interest and on arm’s-length terms, investigates the creditworthiness of the acquirer, prepares a detailed report to shareholders and obtains approval from the general meeting by qualified majority. In addition, a net-assets test must be satisfied – ie, it should be established that the company’s share capital and non-distributable reserves do not exceed its net assets – and a non-distributable reserve equal to the aggregate amount of the assistance must be created.

In international debt financing transactions with a Luxembourg component (eg, involving Luxembourg entities or a Luxembourg law-governed security), intercreditor arrangements are a standard feature of the capital structure whenever more than one layer of debt is present. These arrangements are typically documented in an intercreditor or subordination agreement which sets out the commercially agreed rights of the different creditors, from external finance parties to intragroup lenders and shareholders.

Intercreditor agreements are generally governed by the same law as the main financing documents, although Luxembourg law can be sometimes chosen. The main provisions of such agreements address, inter alia, the ranking of creditors and the priority of their respective claims, the method of applying payments and proceeds, the consequences of the occurrence of an event of default and enforcement (including standstill and consultation mechanics), as well as the appointment of the security agent and its terms.

Intercreditor arrangements are concluded so that subordination and enforcement between the various creditor classes in Luxembourg structures are properly coordinated, with intercreditor agreements constituting a key contractual mechanism for their implementation.

There is no general statutory regime on contractual subordination in Luxembourg and only limited case law on its validity and enforceability. Contractual subordination is carried out through the principle of freedom of contract recognised under the Luxembourg Civil Code. If it is agreed between the relevant parties, the claims of one creditor (or class of creditors) may be contractually subordinated to the claims of another creditor (or class of creditors).

Legal subordination in Luxembourg is not specifically codified as such beyond the pari passu principle among creditors which is expressed in the Luxembourg Civil Code. Unsecured creditors rank equally in the event of insolvency proceedings, subject to certain claims that enjoy mandatory statutory preference (eg, specific employee, tax and social security claims) and to the priority of secured creditors over their collateral.

Enforcement Triggers

The criteria under which enforcement can be triggered for a Luxembourg security are contained in the relevant security document (usually under the definition of an “Enforcement Event”) and should be checked on a case-by-case basis. These criteria are freely decided between the relevant parties, and are generally aligned. They typically govern material breach of contract, initiation of insolvency proceedings, non-payment, and sometimes contain information that the debt should be accelerated (if provided under the main financing documentation).

Enforcement Procedures

The applicable enforcement procedures depend on the type of security to be enforced. The main categories of security are guarantees, mortgages, civil/commercial pledges and pledges created under the Financial Collateral Law.

Guarantees are typically enforced by means of notice to the guarantor. The specific formalities of the enforcement are usually found in the underlying guarantee document.

Mortgages and civil/commercial pledges are enforced through public auction of the pledged assets, and require court involvement. The pledgee must apply to the court for authorisation to sell the pledged assets and inform the debtors, via bailiff notification, before the enforcement procedure can be initiated. This is a more formal enforcement procedure compared to the available enforcement procedures for pledges under the Financial Collateral Law, and is designed to safeguard both creditor and debtor rights.

Pledges over financial instruments governed under the Financial Collateral Law can be enforced via various methods, as provided under its Article 11. No notification is required to be given to the pledgor, and the pledgee is free to choose the enforcement procedure. One or more of the following enforcement methods can be applied, over all or part of the pledged assets, on one or more occasions, as follows:

• Appropriation/private appropriation: The pledgee may appropriate the pledged assets, at the price determined pursuant to the agreed valuation method (specified in the relevant pledge agreement). Depending on the nature of the pledged assets (ie, shares, accounts, receivables), certain formalities need to be observed (eg, update of the share register of the relevant company, enforcement notice sent to account bank or to the underlying debtor). The pledgee can either undertake the ownership itself or transfer the pledged assets to a designated third-party company.
• Private sale: The pledgee may sell the pledged assets in private transactions on “arm’s length” or normal commercial conditions.
• Sale by public auction: The pledgee may sell the pledged assets by public auction at a time, place and in a way determined by the pledgee. The pledgee should define auction timing and logistics in the enforcement record, provide appropriate public notice consistent with market practice and applicable law.
• Court-ordered assignation or transfer: The pledgee may apply to the Luxembourg Courts for an order that the title to the pledged assets be assigned and/or transferred to the pledgee or to such other person as the security may designate for payment of all or any part of the secured obligations.
• Set-off: If the underlying pledge agreement expressly authorises it, the pledgee may effect a set-off between the pledged assets and the secured obligations. Set-off requires mutual, certain and due obligations between the same parties (whether legally or contractually arranged).
• Direct payment request: The pledgee, may, in the case of the account pledges only, request by notice from the bank with which the accounts are held, direct payment from the pledged accounts into an account designated by the pledgee.

The pledgee, may, in the case of the receivables pledges only, request by notice that the relevant debtor(s) under the receivables pledge agreements make any payments under the receivables pledged directly to an account designated by the pledgee.

Following execution of any of the above enforcement procedures, the proceeds of the enforcement procedure must be applied with a view to satisfying the secured obligations. Any surplus from the proceeds should be returned to the pledgor.

The recognition and enforcement of a judgment rendered from the courts of another country by the courts of Luxembourg, as well as the method and conditions for such recognition and enforcement, depend on the location of the forum that rendered the judgment.

If the rendering forum is located in an EU member state or Denmark, then the foreign judgment will be enforced in Luxembourg, in accordance with the rules of Council Regulation (EC) No 1215/2012 of 12 December 2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters.

If the rendering forum is located in the UK, then the foreign judgment will be enforced in Luxembourg, in accordance with the provisions of the Hague Convention on choice of courts agreements concluded on 30 June 2005.

If the rendering forum is located in Iceland, Switzerland, or Norway, then the foreign judgment will be enforced in Luxembourg, in accordance with the provisions of the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

If the rendering court is located in a country which is not a party to the above Conventions (for instance in the US), and, consequently, these Conventions do not apply, then the judgment will be enforced in accordance with the Luxembourg New Code of Civil Procedure (Nouveau code de procedure civile) provided that an action for exequatur (Luxembourg’s enforcement procedure) is brought before the Luxembourg District Court (Tribunal d’Arrondissement de Luxembourg).

Luxembourg’s restructuring and reorganisation landscape was reshaped by the Law of 7 August 2023 on business preservation and modernisation of insolvency law (“the Business Preservation Law”). This came into force on 1 November 2023, implementing Directive (EU) 2019/1023 on preventive restructuring frameworks.

The Business Preservation Law applies to individual traders, commercial companies (Sàrls, or limited liability companies), SAs, SCSs (limited partnerships), and SCAs); special limited partnerships (SCSps); craftsmen and non-trading companies.

Credit institutions and investment firms, insurance and reinsurance companies, specialised investment funds, venture capital investment companies, securitisation organisations, reserved alternative investment funds, and payment and electronic money institutions are excluded from its scope.

The Business Preservation Law replaced the former, rarely used procedures, introducing new, preventive in- and out-of-court reorganisation processes aimed at saving companies from filing for bankruptcy immediately when in difficulty.

Out-of-Court Reorganisation Procedures

Reorganisation by mutual agreement (réorganisation par accord amiable) enables the debtor to propose to at least two of its creditors an amicable agreement for the reorganisation of all or part of its assets or business. A company conciliator may be appointed at the debtor’s request to facilitate the process.

If an amicable agreement is reached between the debtor and its creditors, a court’s ruling to this effect is needed to make the agreement enforceable. This ruling is not subject to publication, notification, or appeal. Third parties may be informed about the agreement only with the express consent of the debtor. The participant creditors in the amicable agreement cannot be held liable because the amicable agreement does not preserve the continuity of all or part of the business.

In-Court Reorganisation Procedures

Stay of payment (sursis de paiement)

A debtor can apply to the court for a stay of payment to negotiate a reorganisation by mutual agreement described above. The stay of payment suspends all payments on debts incurred prior to the application, and it can last for an initial period of up to four months, which the court may extend to a maximum of 12 months in total.

During the stay, individual enforcement measures and the enforcement of claims against the debtor’s assets are suspended and may not be pursued, and no new attachments or seizures of the debtor’s assets may be carried out. In addition, while existing contracts remain in force, the debtor may unilaterally suspend its performance (other than under employment contracts) where this is necessary for the reorganisation, and the counterparty may, in turn, suspend its corresponding obligations. Lastly, the debtor cannot be placed into bankruptcy, judicial dissolution, or administrative dissolution without liquidation, save for exceptional cases involving criminal activities or serious violations of laws pertaining to companies by the debtor.

Judicial reorganisation by collective agreement (réorganisation judiciaire par accord collectif)

The judicial reorganisation by collective agreement consists of a detailed reorganisation plan prepared by the debtor setting out the debtor’s financial situation and the proposed remedies and filed at the court. The plan involves all the creditors of the debtor, which are divided into two categories (ordinary and extraordinary creditors). 

The plan must be approved by a favourable vote of the majority of each category of creditors, and must represent at least half of the sums due in each category. Following approval of the plan by the creditors as set out above, the court’s approval is needed to make it enforceable. The court can still sanction the plan even if approval by the creditors’ meeting based on the conditions set out above has not been obtained, if:

• at least one category of creditors has approved the plan;
• only the ordinary creditors’ class has approved the plan, in which case extraordinary creditors must receive comparatively better treatment; and
• no creditor class can recover more than the full amount of its admitted claims.

The plan must be implemented within five years following its sanction by the court. If the debtor fails to comply with the plan, its repeal may be sought by any creditor or by the public prosecutor. If the debtor goes bankrupt, the plan is automatically revoked. This renders it entirely without effect, although not retroactively, meaning that payments and transactions already implemented in accordance with the plan remain valid.

Judicial reorganisation through transfer by court order (réorganisation judiciaire par transfert par decision de justice)

The judicial reorganisation through transfer by the court order allows all or part of the assets or activities of the debtor in difficulty to be transferred by court order, in order to preserve their continuity. This procedure can be initiated by the debtor; by the public prosecutor; by a creditor; or by any other person with an interest in acquiring all or part of the business.

If the procedure was initiated by the public prosecutor, the court must appoint a legal representative (mandataire de justice) who bears responsibility for organising the transfer, through the sale or transfer of movable or immovable assets, that is necessary or useful for maintaining all or part of the debtor’s economic activities and ensuring the preservation of employment by one or more third-party buyers. The legal representative must solicit offers, identify that which is most suitable, and obtain the court’s approval to proceed with the transfer.

There is a common consensus among legal doctrines that securities created in accordance with the Financial Collateral Law remain enforceable and are not affected by a petition or initiation of reorganisation proceedings (except for in very limited cases to be examined on a case-by-case basis).                                     

Under Article 437 of the Luxembourg Commercial Code, two criteria must be met for a commercial company to be declared insolvent. It must have ceased its payments (cessation des paiements), and one non-payment of a single debt qualifies as cessation of payment, and it must have lost its creditworthiness (ébranlement du crédit). A debtor’s bankruptcy may be requested by its the management board, by a creditor, by the public prosecutor or by the court’s own motion.

Once the court declares a person bankrupt, it appoints a receiver (curateur), who exclusively represents the bankrupt company and manages the bankruptcy estate in the interest of the creditors as a whole and the bankrupt company, acting independently without the obligation to involve the shareholders or creditors in the process. A creditor must file its claims with the receiver and the competent court.

Certain transactions and agreements concluded during the hardening period (période suspecte) which is fixed by the court and can date back up to six months from the date on which the court declared a person bankrupt, and, for some specific payments and transactions, during ten days before the commencement of this period, can be challenged by the opening of insolvency proceedings, in particular:

• the granting of a security interest for antecedent debts;
• the payment of debts which have not fallen due, whether payment is made in cash or by way of assignment, sale, set-off or any other means;
• the payment of debts which have fallen due by any other means than in cash or by bill of exchange;
• the sale of assets without consideration or for materially inadequate consideration; and
• Article 448 of the Luxembourg Code of Commerce and Article 1167 of the Luxembourg Civil Code (actio pauliana) allows the receiver to challenge any fraudulent payments and transactions concluded prior to the bankruptcy, without time limitation.

Financial collateral created pursuant to the Financial Collateral law are bankruptcy-remote and do not fall into the bankruptcy estate managed by the receiver. A creditor holding a security under the Financial Collateral Law can enforce that security independently any bankruptcy proceedings, meaning that it can be enforced without/before the commencement of any insolvency proceedings (subject to the terms of the underlying security agreement). The security remains enforceable even after bankruptcy proceedings are opened.

The order of payment of creditors not holding claims under the Financial Collateral Law is as follows:

• costs of the estate (créances de la masse), which include court costs and receivers’ fees, as well as other expenses incurred in preserving or realising the estate;
• creditors preferred by law, which include certain employee, tax and social security claims;         
• secured creditors with security outside the Financial Collateral Law, which include mortgagees over real estate, ships, aircraft, or beneficiaries of a general business pledge; and
• ordinary unsecured creditors, which include creditors with claims without a privilege and without valid security; these rank pari passu among themselves and are paid after the estate costs and the claims of preferred/secured creditors are satisfied.

The notion of equitable subordination is not recognised under Luxembourg law. By virtue of holding equity, and not debt, the shareholders of a debtor are treated as subordinated creditors.

Stamp Duty

Luxembourg does not levy a general stamp duty, ie, no tax is levied on legal documents or transactions as a condition to their validity or enforceability in the country.

Registration duties are, however, levied on certain legal documents and acts; on documents that are attached as an Appendix to an act (annexés à un acte) that itself is subject to compulsory registration; and on documents deposited in the minutes of a notary (déposés au rang des minutes d’un notaire). The registration of an act or a deed can also be carried out voluntarily.

Depending on the nature of the document or act, registration duties are either ad valorem, typically calculated by reference to the market value of the assets or rights concerned, unless the law provides for a different basis, or fixed (either EUR12 or EUR75). Corporate acts and deeds – eg, the incorporation of a Luxembourg company, any amendments to its articles of association, capital increases, and contributions – bear a fixed registration fee of EUR75. Deeds that must be registered and give rise to proportional registration duties are relatively scarce, and mainly relate to agreements involving real estate situated in Luxembourg.

Withholding Tax/Qualifying Lender Concepts

As a starting point, interest paid by a Luxembourg company is not subject to withholding tax there. Withholding tax may arise only in specific situations, such as in respect of certain linked profit or equity-type instruments, or where interest is paid (or treated as paid) by a Luxembourg paying agent to individuals resident in Luxembourg. In that latter case, the withholding tax is levied as a final tax (retenue à la source libératoire,orRELIBI).

Financing documentation for Luxembourg borrowers typically requires the borrower to gross up interest payments for any withholding tax that becomes due, other than the RELIBI. In practice, this protection is normally limited to lenders who pass as “qualifying lenders” at the time the facility agreement is signed, so that any subsequent change in law increasing or introducing withholding tax risk is contractually borne by the borrower. In broad terms, a “qualifying lender” is one that can receive interest free of withholding tax (or benefits from a domestic exemption) or that is tax resident in a jurisdiction which has concluded a double tax treaty with Luxembourg granting an exemption from, or a reduced rate of, withholding tax on interest.

Thin Capitalisation Rules

Luxembourg does not operate a formal, statutory thin capitalisation regime with fixed debt-to-equity ratios. Instead, the level of acceptable leverage is controlled through general deductibility rules, transfer-pricing principles and the interest limitation rules implementing the EU Anti Tax Avoidance Directive.

From a corporate tax perspective, interest is deductible only where the borrowing is connected with the company’s activities and the terms, including the amount of debt, are in line with what independent parties would have agreed. If a Luxembourg company is financed on terms (or at a level of gearing) that would not be acceptable between third parties, part of the debt may be treated as equity for tax purposes and the corresponding interest re characterised as a hidden distribution which is not deductible and may be viewed as a dividend for Luxembourg tax (including withholding tax) purposes.

In parallel, Luxembourg applies an “earnings stripping” rule that restricts the deduction of net borrowing costs to the higher of 30% of a tax EBITDA measure or EUR3 million per year, subject to various exemptions and grandfathering for certain older loans. This rule applies irrespective of whether the lender is related or third party, and can affect both external bank debt and intragroup funding.

Historically, taxpayers and the tax administration often referred to an 85:15 debt-to-equity ratio as a practical benchmark for intragroupfinancing companies, but recent case law and administrative practice emphasise that such ratios have no binding legal status. The appropriate level of leverage must be supported case by case, based on a proper functional and risk analysis and consistent with the OECD transfer-pricing guidance on financial transactions. For leveraged Luxembourg structures, this means that both the amount of debt and the interest expense need to be justified by robust transfer pricing documentation and tested against the interest limitation rule, rather than relying on any fixed “safe harbour” gearing.

From the standpoint of a typical corporate borrower, debt financing in Luxembourg does not generally give rise to borrower-side regulatory requirements. Regulatory questions arise primarily at the level of the lender and, where applicable, at the level of any regulated fund or vehicle that originates or acquires the debt.

On the lender’s side, the key statute is the Law of 5 April 1993 on the financial sector (LFS). Two categories are particularly relevant. First, entities whose business consists in both taking deposits or other repayable funds from the public and granting credit for their own account qualify as credit institutions. They must be authorised under the LFS and are subject to prudential supervision by the Commission de Surveillance du Secteur Financier (CSSF). EU-authorised credit institutions may lend into Luxembourg on a cross-border basis or via a branch under the EU passport, provided the activity envisaged is covered by their home state licence.

Secondly, non-bank lenders that grant loans on their own account may fall within the category of “professionals performing lending operations”, which are a type of specialised professional of the financial sector (PFS). A specialised PFS licence must be obtained from the CSSF before commencing lending activities that qualify as the professional extension of credit to the public. This regime is distinct from that applicable to credit institutions in that it does not involve deposit-taking.

The notion of “public” is interpreted by the CSSF in a restrictive way. In particular:

• purely intragroup lending is not regarded as lending to the public;
• lending to a limited group of pre-identified counterparties is generally not treated as lending to the public; and
• the CSSF has stated that loans with a minimum principal amount of EUR3 million granted exclusively to professional clients within the meaning of the Luxembourg Consumer Code fall outside the “public” concept and therefore outside the PFS lending licence requirement.

Directive 2024/1619 (the sixth Capital Requirements Directive – CRD VI) brings a tightened new regime for non-EU credit institutions, applicable from January 2027. CRD VI imposes a rule on those credit institutions to operate through an authorised EU branch in order to conduct lending and other core banking activities vis à vis EU clients. The Law of May 2026 transposes CRD VI into Luxembourg domestic law. Non-EU banks that are currently approaching Luxembourg borrowers on an active, cross-border basis should therefore proactively evaluate whether their business model will need to be re-structured to comply with this new framework.

The branch requirement under CRD VI is not intended to capture:

• non-bank lenders, such as most credit or debt funds;
• interbank lending; or
• intragroup financing arrangements.

In addition, the directive preserves the concept of reverse solicitation: where an EU borrower reaches out to a third-country lender entirely on its own initiative, without prior solicitation or marketing by that lender in the EU, the activity is not treated as being carried on in the EU and does not, in itself, trigger the branch requirement.

Documentation signed by Luxembourg entities (including documentation related to debt financing, whether governed by Luxembourg or foreign law) should clearly indicate the registered address of the entity as well as their registration number with the Luxembourg Trade and Companies Register (Registre de commerce et des sociétés – RCS). The person(s) signing documentation on behalf of Luxembourg entities should indicate the name and title/capacity (eg, manager, director, authorised signatory) under which they are signing.