7 October 2025 Joakim-Antoine Charvet  -  Danièle Buchler  -  Cyrielle Nis  -  Adrien Piron  -  Delphine Martel  - Pit Glesener Tax

Luxembourg partnerships: commercial nature of single-project vehicles affirmed

The classification of the commercial activity of a Luxembourg limited partnership (société en commandite simple – “SCS”) dedicated to the production and exploitation of a single film has been the subject to two fairly recent decisions of the Administrative Tribunal (n°49747 & 49749, 6 June 2025). 

These cases clarify how the Luxembourg courts assess the municipal business tax liability of a Luxembourg partnership, particularly when the SCS asserts that its activities do not constitute commercial activities within the meaning of the Luxembourg Income Tax Law (“LITL”).

A common legal issue in both cases

In both cases, it should be recalled that the SCS was structured to carry a single international film project: acquisition, management and enhancement of rights, project financing, outsourcing of production and distribution, while retaining certain residual rights. The claimants asserted their purely asset holding nature, claiming that their activity did not exceed the mere passive holding of rights and denying any commercial activity which meets the different criteria set out by article 14 n°1 of the LITL, notably (i) an independent activity, (ii) which is profit driven, (iii) exercised in a permanent manner and (iv) participating to the general economic life.

The claimant companies particularly emphasised that their activities were of mere asset holding nature by sustaining that all the production and distribution activities had been outsourced.

Moreover, the claimants argued that the presumption of non-commerciality, which applies to alternative investment funds ("AIFs"), should also extend to them on the basis that they operated in a comparable manner.

The tribunal’s reasoning: cumulative criteria for commercial activity

In line with article 14 n°1 of the LITL, the tribunal examined four cumulative conditions:

  • Independence: The SCS must act on its own behalf and at its own risk. In the cases at hand, this was demonstrated by the SCS directly signing financing agreements, being liable for the repayment of bank debt, and assuming various commitments related to the project’s success. Even where production and distribution were outsourced, neither the active role nor the assumption of risk were eliminated.
  • Profit motive: Echoing the requirement to “realise profits”, the tribunal first dismissed the distinction between opaque and transparent entities. The structuring of their activities demonstrated an economically rational behaviour aimed at generating profit, even if that profit was required to be distributed to their partners.
  • Permanence: Sustainable organisation can be deduced from a single project where it involves multiple transactions over several years (financing, contracting, management and exploitation of rights) provided there is a genuine structure, even for non-repetitive activities. The tribunal was guided by several decisions from German case law, in particular drawing on the reasoning adopted by the Bundesfinanzhof: the isolated nature of a project does not, in itself, exclude the permanence of commercial activity, if the organisational structure is adequate.
  • Participation in general economic life: According to the tribunal, this criterion was met because the claimants engaged in multiple contractual and financial relationships (loan agreements, production and distribution contract) with other parties active in the sector. The tribunal noted that the claimants had indeed acted in a way perceptible to other operators, even if the general public was not directly involved.  
Conclusion:

The fact that an SCS is created for a single project does not preclude it from being classified as commercially active under article 14 LITL, where the relevant criteria are fulfilled. Referring to German case law and legal doctrine, in situations where there is uncertainty regarding the commercial nature of an activity, it is decisive to consider whether, from the public’s perspective (Verkehrsauffassung), the activity is of commercial nature and exceeds the mere administration of private wealth.