Advocate General Juliane Kokott recommended on 18 June 2026 in Case C-138/24 that the Court dismiss the European Commission's infringement action against Luxembourg, ruling that Luxembourg correctly transposed the Anti-Tax Avoidance Directive by exempting securitisation special purpose entities from interest limitation rules as comparable financial undertakings.
The Advocate General (AG) Juliane Kokott of the Court of Justice of the European Union (CJEU) has issued her opinion in Case C-138/24, involving an infringement claim by the European Commission against the Grand Duchy of Luxembourg on 18 June 2026.
The case centres on whether Luxembourg incorrectly transposed the Anti-Tax Avoidance Directive (ATAD) by including securitisation special purpose entities (SSPEs) within the definition of “financial undertakings,” thereby exempting them from interest limitation rules.
Core legal dispute
The ATAD includes a “rule of limitation of interests” to prevent multinational groups from artificially reducing their tax base through excessive interest payments. However, Article 4(7) of the ATAD allows Member States to exempt “financial undertakings” from these rules because their specific business models—where interest is often a core component of their activity—require a more tailored approach.
The Commission argued that the definition of “financial undertaking” in Article 2(5) of the ATAD provides an exhaustive list of entities. Since SSPEs (as defined by the Securitisation Regulation (EU) 2017/2402) are not on that list, the Commission contended that Luxembourg breached EU law by adding them to its national list of exempted entities.
Under ATAD, interest deductions are generally capped at 30% of EBITDA, with limited exceptions such as a EUR 3 million safe harbour and optional exclusions for certain financial undertakings.
The Commission argued that securitisation special purpose entities are not covered, because Article 2(5) sets out an exhaustive list of financial undertakings that does not include them.
AG Kokott’s assessment
AG Kokott acknowledged that, while SSPEs are not literally mentioned in the ATAD’s list, a purely formalistic interpretation would be insufficient. Her analysis focused on several key areas:
- Comparability of SSPEs: The AG found that SSPEs are comparable to the financial undertakings explicitly listed in the ATAD. Like banks or investment funds, SSPEs primarily deal with borrowed capital and interest as their core business activity rather than as a means of financing industrial production.
- Regulatory framework: SSPEs became specifically regulated at the EU level through the Securitisation Regulation in late 2017—after the ATAD was adopted but before the deadline for its transposition. This regulation imposes transparency and oversight requirements similar to those of the financial entities already listed in the ATAD, making SSPEs less susceptible to the specific tax abuses the interest limitation rules target.
- Principle of equal treatment: A central pillar of the AG’s opinion is the principle of equal treatment (Article 20 of the Charter of Fundamental Rights). The AG argued that failing to treat SSPEs as financial undertakings would constitute unjustified unequal treatment of comparable situations.
- Primacy of primary law: The AG noted that when Member States transpose EU directives, they are bound by the Charter. Therefore, Luxembourg was not only permitted but obliged to interpret and apply the ATAD in conformity with primary law, which included ensuring equal treatment for comparable financial entities like SSPEs.
Conclusion and recommendation
AG Kokott concluded that Luxembourg did not fail its obligations under the ATAD or the TFEU. She argued that by including SSPEs in the exemption, Luxembourg correctly applied the principle of equal treatment while exercising its margin of appreciation in transposing the directive. Consequently, she proposed that the Court of Justice should dismiss the Commission’s action and order the Commission to pay the costs.
