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The legal certainty principle in Luxembourg tax law

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The decision could bolster taxpayers’ positions in disputes with the Luxembourg tax authorities

Melanie Delvaux and Michael Klotz of Deloitte Luxembourg explain why Luxembourg’s Constitutional Court’s decision is an important development for the principles of legal certainty.

For the first time, Luxembourg’s Constitutional Court issued a decision on January 22 2021 on the value of the legal certainty principle in tax legislation (Decision No. 152).

Luxembourg tax law is based on the principle of legality as provided in the Constitution of the Grand Duchy. More broadly, only the Luxembourg legislature has the right to create tax laws.

The principle of legal certainty requires that laws be made public, be definite with enough clarity, not have retroactive effect, and protect legitimate interests and expectations. 

While the legal certainty principle has long been recognised by the Luxembourg administrative courts and, at the supranational level, by the European Court of Human Rights and the European Court of Justice (ECJ), it is not codified in the Constitution and the Constitutional Court had not ruled previously on its constitutional recognition or value.  

Decision of the Constitutional Court

The case concerned the Law of July 23 2016, which transposed EU Directive 2015/2060, repealing the EU Savings Directive, into Luxembourg law. The law provides that interest payments from paying agents no longer will be subject to a 10% final withholding tax but must be included in the taxpayer’s taxable income. 

In the case, the Luxembourg tax authorities had refused to apply a 10% final withholding tax to a taxpayer who held Swiss bonds and received interest from a Swiss-based paying agent in 2016 prior to the law being enacted. 

Consequently, the tax authorities had asserted that the interest had to be included in the taxpayer’s taxable income and thus be subject to progressive standard income tax rates.

The court ruled that there was no justification for applying the law retroactively. In doing so, it stated that both the ECJ and the European Court of Human Rights recognise the principle of legal certainty as a general principle, as well as the principles of legitimate expectations and non-retroactivity of laws as fundamental principles and expressions of legal certainty. 

The court thus found that the principles of legal certainty, legitimate expectations, and non-retroactivity are to be seen as fundamental principles inherent in Luxembourg law. As the rule of law must be sufficiently clear and accessible, but also predictable, the court considered these principles to be corollaries to the fundamental principle of the rule of law. 


The Constitutional Court’s decision is an important development as the principles of legal certainty, legitimate expectations, and non-retroactivity (the latter two being extensions of the legal certainty principle) have been officially recognised as having constitutional value. 

While the concepts covered under the umbrella of legal certainty was a hotly disputed topic some decades ago, they are back in the news as tax laws, which are more and more complex, may still be enacted with a potential retroactive effect. 

This decision should be quite relevant to administrative bodies and taxpayers as the legislature should defer to it when preparing, reviewing, and voting on new tax laws. 

With respect to recent tax legislation already in force that may present questions of retroactivity, the decision could bolster taxpayers’ positions in disputes with the Luxembourg tax authorities. 


Melanie Delvaux 

Partner, Deloitte Luxembourg



Michael Klotz

Assistant manager, Deloitte Luxembourg



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