The European Commission has launched an infringement procedure against Luxembourg, urging it to end a tax regime that discriminates against dividends from public investments by other EU and EEA member states, giving the country two months to respond before further action.
The European Commission issued a formal notice to Luxembourg on 11 December 2025, urging the country to end discriminatory tax treatment on dividends from public investments in its December 2025 infringements package.
Taxation
Letter of formal notice
Commission calls on Luxembourg to eliminate a discriminatory tax treatment of dividends from public investments
The European Commission decided to open an infringement procedure by sending a letter of formal notice to Luxembourg (INFR(2025)4003) for failing to abolish a tax regime that discriminates dividends derived from public investments by other EU and EEA Member States, as well as their public entities.
The dividends distributed by companies established in Luxembourg to the State of Luxembourg and its public entities are exempt from a withholding tax of 15 %, unlike dividends distributed to other Member States of the EU and the EEA and their public entities, which are subject to the withholding tax.
It results in a discrimination of public investments from other EU or EEA Member States in companies of Luxembourg, which is contrary to the principle of the free movement of capital laid down in Articles 63 TFEU and 40 EEA. The Commission is therefore sending a letter of formal notice to Luxembourg, which now has two months to respond and address the shortcomings raised by the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.
