In Luxembourg, the CFC rules (Article 164ter LITL, implementing ATAD I Option B) include an exclusion for entities that carry out substantial economic activity. The assessment is based on whether the foreign entity has the people, assets, equipment and premises necessary to perform its functions and to assume the risks linked to its activities.
An arrangement is regarded as non-genuine where the CFC would not own the assets or bear the risks generating its income were it not for the significant people functions performed by the Luxembourg controlling company. Conversely, if the CFC itself employs staff, manages assets, and assumes risks through its own decision-making and operational capacity, its activities are considered genuine for purposes of the application of the CFC rule.