EU Securitisation Vehicles Likely To Continue To Be Exempt From Interest Limitation Rules

On 18 June 2026, Advocate General Juliane Kokott delivered her opinion in Case C‑138/24, European Commission v Grand Duchy of Luxembourg, concerning Luxembourg’s implementation of the EU Anti-Tax Avoidance Directive (“ATAD” or Directive). In the case at hand, she examined whether Luxembourg was entitled, when implementing ATAD, to treat securitisation entities within the meaning of Regulation (EU) 2017/2402 as “financial undertakings” exempt from the interest limitation rule.

Background to the case

As a reminder, the infringement proceedings stem from Luxembourg’s implementation of ATAD in 2018, when securitisation entities within the meaning of Regulation (EU) 2017/2402 were included among the “financial undertakings” and thereby excluded from the scope of the interest limitation rule. The European Commission argued that this approach went beyond ATAD, because EU securitisation entities are not expressly included in the exhaustive list of financial undertakings set out in Article 2(5) of the Directive.

Advocate General’s analysis

The Advocate General accepted that, on a purely textual and structural reading of ATAD, the Commission’s position had force, since ATAD defines “financial undertakings” by reference to a closed list that does not mention securitisation entities. However, she considered that the relevant ATAD provisions must also be interpreted, as far as possible, in conformity with EU primary law, including the principle of equal treatment enshrined in article 20 of the Charter.

In the Advocate General’s view, securitisation entities share fundamental economic and regulatory features with other financial sector entities. In particular, their business model is based on borrowed capital and interest flows and constitutes a regulated financial activity rather than activity in the “real economy” for which the EBITDA-based interest limitation rule was primarily designed.

Moreover, these entities are subject to specific regulation at EU level, including transparency requirements and supervisory oversight. In that context, she considered EU securitisation entities to be in a situation comparable to the financial undertakings expressly covered by ATAD.

It should be noted that the AG also observed that the Commission itself appears to recognize the comparability of securitisation entities to financial undertakings, as evidenced by its own proposal for the so-called “ATAD III” directive, which includes securitisation entities in the list of regulated financial undertakings.

On that basis, the Advocate General concluded that excluding securitisation entities from the category of financial undertakings would create unjustified unequal treatment. She therefore considered that Luxembourg, by including EU securitisation entities in its domestic definition of financial undertakings and exempting them from the interest limitation rule, did not breach its obligations under ATAD or article 288(3) TFEU.

Main implications of the opinion

From a practical Luxembourg tax perspective, this opinion is significant because it endorses the view that ATAD’s financial undertaking exemption can, in this specific context, be read in a manner consistent with the principle of equal treatment to encompass securitisation entities regulated under EU law.

If the Court follows the Advocate General’s reasoning, which is likely considering the arguments put forward, this will confirm the compatibility of Luxembourg’s existing approach with EU law and provide welcome support for the long-debated exclusion of qualifying securitisation vehicles from the interest limitation rule.

In her proposed disposal, the Advocate General recommends the Court to dismiss the Commission’s action in full and to order the Commission to pay the costs.