Luxembourg: New ACD circular on overdrawn current accounts

The Administration des Contributions Directes (ACD) issued a new circular on February 3, modifying the rules regarding the remuneration of overdrawn current accounts for associates and shareholders.

New Interest Rates

The fixed rate of 5% has been abolished. From now on, the applicable rate must reflect the prevailing market conditions between independent parties, thereby adhering to the arm’s length principle.

To simplify the process, it is permitted to refer to the annual interest rate applicable to consumer loans, available on the website of the Banque centrale du Luxembourg (https://www.bcl.lu/fr/media_actualites/communiques/2025/index.html).

For reference, in 2024, the average annual consumer loan rate was 4.73666%.

Calculation Method

• If the current account remains overdrawn throughout the year, interest may be calculated based on the annual arithmetic average of the overdrawn balance (amounts as of 01/01 and 31/12).
• If the current account is overdrawn for only part of the year, interest may be calculated based on the monthly arithmetic average of the overdrawn balance (amounts at the end of each month).

Clarifications Pending

At this stage, the circular does not specify whether the interest rate to be applied should be the one in effect at the time of withdrawal or an average rate over the loan period. We are closely monitoring further clarifications and will keep you informed.

What Should You Do Now?

Given the current trend of rising interest rates, we advise you to limit the use of this overdraft mechanism.

Our team is available to answer any questions and assist you if needed.

Contact us for any assistance!