Tax Treaty Case Law around the Globe 2019

S. 123Luxembourg: Conflict of qualification and partnership income: autonomous and common interpretation

Werner Haslehner

S. 1241. Introduction

The dispute giving rise to the judgment discussed in this chapter concerns treaty interpretation in the presence of deviating national definitions of business income and thus touches upon a number of long-standing questions surrounding the meaning of article 3(2) of the OECD Model, the importance of common interpretation, and the resolution of qualification conflicts.

The issue concerned arose from a different qualification, under domestic law, of the income earned by limited partnerships engaged in private asset management activity: while the income in question was treated as interest and capital gains from a German perspective, Luxembourg’s domestic law applied a legal fiction which resulted in it being treated as business income.

In the case, Luxembourg’s highest administrative court (Cour administrative, hereinafter the “Court”) took advantage of Luxembourg and German case law, scholarship and the common legislative heritage of both countries in order to resolve the different income classification under each country’s domestic law. The court did not, ho...