The Luxembourg government has adapted its' previously
announced fiscal reform proposals.
Earlier this year, the Luxembourg government announced proposed changes to the country's corporate
and personal tax frameworks, including a progressive reduction (in
two steps) of the corporate income tax (CIT) rate from 21% to
first article on this subject, the reform plans have been
amended and these changes would impact corporations. It's
important to note that the measures are yet to be outlined in full,
and their implementation from 1 January 2017 would only proceed if
formalised in a parliamentary bill, and subsequently voted
Tax reform updates
Limitations on the use of
future tax losses
Based on the government announcement of 29 February 2016, the
initial plan was to limit to 10 years the deferral of tax losses
generated from 1 January 2017, and such losses would only be
available to offset the taxable income of the subsequent period up
to 80% of the taxable income of each period.
However according to the latest announcement made on 21
April 2016, it is now envisaged the carrying forward of losses
would be limited to 17 years, and 75% of the profits realised in
The tax losses carried forward from previous years should not be
affected by these limitations.
Other measures aimed at
improving Luxembourg's competitiveness
In order to improve Luxembourg's competitiveness, it was
announced on 21 April 2016 that the government would work on the
development of measures to promote the development of start-ups and
SMEs, as well as on the introduction of a new investment reserve
regime in order to promote investments.
In order to encourage investments and in particular investments
in innovation, the investment tax credit regime would be improved:
the tax credit for additional investments is to be
increased from 12% to 13% and the tax credit for global investments
increased from 7% to 8%.
Regarding investments in real estate, an increased depreciation
rate would be introduced to the special depreciation regime.
Other related tax news
New bill on the automatic
exchange of information with respect to tax rulings and advance
pricing agreements (APA)
On 22 March 2016, a new bill (the Bill) was submitted for
approval to the Luxembourg Parliament. The Bill includes an
exception from automatic exchange of information, where a tax
ruling or advance pricing agreements (APA) were issued, amended or
renewed before 1 April 2016; for companies with a group-wide annual
net turnover of less than €40m in the preceding fiscal
However, this exemption does not apply to companies conducting
primarily financial or investment activities.
New Form 777 to file in case
of rulings and APAs subject to automatic exchange of
Automatic exchange of information on tax rulings and APAs will
have to be carried out by the Luxembourg Tax Authorities (LTA)
using a standard format. In this respect, the LTA have recently
created the form 777E which has to be completed by taxpayers with
tax rulings or APAs falling within the scope of automatic exchange
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