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This first edition of “Legal & Tax REvolution” focuses on a significant judgment of 13 February 2026 dealing with the roll over of capital gains realised on the sale of real estate assets under article 54 LIR. Although this roll over mechanism is widely used in practice, it is rarely addressed in published case law. The decision therefore provides valuable and timely practical insights.

The facts: an intragroup reinvestment structure

In the case at hand, a Luxembourg company B, member of a fiscal unity, sold a real estate asset in 2017 and realised a capital gain, which it allocated to a reinvestment reserve in accordance with article 54 LIR. In 2019, the sale proceeds were reinvested through the acquisition of shareholdings from its integrating parent company A as part of a group restructuring.

The tax authorities’ position: lack of substance and abuse of law

The tax authorities denied the application of article 54 LIR, arguing that the transaction merely involved an intragroup transfer of funds lacking economic substance and was incompatible with the purpose of the reinvestment regime. They also alleged an abuse of law, considering that the structure primarily sought to defer taxation of the capital gain, leading to no immediate taxation at the level of B due to the roll‑over, exemption of the capital gain at the level of A under the participation exemption regime, and neutralisation of taxable results through fiscal integration.

The taxpayer’s argument: compliance with legal requirements

The taxpayer contended that all conditions of article 54 LIR were met, in particular the reinvestment deadline, even if the tax authorities considered that the reinvestment had been carried out at an unduly late stage. The taxpayer further submitted that the acquired shareholdings constituted fixed assets used for the purposes of its business activity and that the transaction formed part of a genuine economic restructuring of the group.

The administrative tribunal’s decision: confirmation of the roll-over regime

The tribunal ruled in favour of the taxpayer, confirming that the conditions of article 54 LIR were fulfilled and that neither fiscal unity nor the participation exemption regime prevented the application of the roll‑over. It further held that the transaction was based on sound economic reasons, thereby excluding any abuse of law. To the best of our knowledge, tax authorities did not appeal against the judgment.

Key takeaways for real estate stakeholders

Beyond its technical aspects and helpful clarifications on the reinvestment roll-over regime generally, this judgment sends a clear message: intragroup reinvestments are not per se excluded from the roll‑over regime, provided they are economically justified and aligned with the purpose of the tax deferral mechanism. At a time when genuine substance is increasingly scrutinised, this decision offers welcome—and practical—reassurance for real estate groups navigating reinvestment strategies.

With thanks to Paul-Augustin Ducrocq,  Loyens & Loeff, for his assistance in preparing this text.

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