Luxembourg: Luxembourg Tax Reform: Measures Affecting Corporations And Individuals

Last Updated: 25 August 2016
Article by Gaetan Grein

The Luxembourg government has presented to the parliament draft law n°7020, concerning new tax measures applicable to corporations and individuals from 1 January 2017.

The draft law covers corporate, indirect and individual taxation measures that aim to render Luxembourg's tax legislation more sustainable, fair and competitive. The draft law is also a reflection of the Government's mission to align Luxembourg with international standards in tax matters.

Updates on corporate tax matters

Corporate income tax (CIT) rate

  • The CIT rate would be reduced from the current rate of 21% to 19% in 2017 and to 18% in 2018. As a result, the overall nominal tax rate (for company having its registered office in Luxembourg-City) would be reduced from 29,22% to 27,08% in 2017 and 26,01% in 2018.
  • Introduction of a reduced CIT rate of 15% applicable as from the FY 2017 for companies with a tax base of less than €25,000. The draft law adds for companies with a tax base of between €25,000 and €30,001, a CIT of €3,750 plus 39% of the tax base above €25,000 (for FY 2017) / of 33% of the tax base above €25,000 (for FY 2018).

Minimum net wealth tax (NWT)

  • The amount of minimum NWT applicable as from 1 January 2016 would increase from €3,210 to €4,815 for companies with fixed financial assets, transferrable securities, receivables owed to affiliated undertakings and cash at bank exceeding 90% of their balance sheet total and €350,000.

Limitations on the use of future tax losses

  • The tax losses generated until 2016 will remain tax deductible without any time limitation.
  • The losses generated as from financial year closing after 31 December 2016 can be used for a limited period of 17 years.
  • The oldest losses would be deemed to be used first.
  • These measures would similarly apply for CIT and Municipal Business Tax (MBT).

(An earlier proposal that taxable profits could only be offset up to 80% with available losses has been abandoned).

Investment tax credit

The investment tax credit (ITC) regime would be improved as follows.

  • The tax credit for additional investments would be increased from 12% to 13% while the tax credit for global investments would be increased from 7% to 8% for the tranche not exceeding €150,000.
  • The global tax credit rate for goods qualifying for the special amortisation foreseen by the art. 32bis of the Luxembourg Income Tax Law (LITL) would be increased from 8% to 9% for the tranche not exceeding €150,000.
  • ITC would also be granted for eligible assets physically located/used on the territory of another state part of the European Economic Area (EEA).

Unemployed tax credit

  • The tax credit for unemployed persons would be extended until the end of 2019.

Neutralisation of exchange gains

The scope of the art.54bis of LITL has been widened. Indeed, the tax deferral of foreign exchange gains resulting from assets denominated in currency other than Euro and representing the share capital of a company would be applicable to any type of taxpayers (and not only to bank/insurance/reinsurance companies as is currently the case) upon filing of a written request no later than three months before the end of the first financial year as from which the benefit is requested. If companies intend to already apply this in 2016, the request would have to be filed before 1 July 2017.

Registration duty

  • The 0.24% registration duty due on notarial deeds documenting the transfer of debt agreements should be abolished.

Business transfers

  • In order to facilitate the transfer of a business to the next family generation or to employees, a tax deferral would be introduced for the capital gain realised on real estate assets (land and buildings) held by the enterprise (under certain conditions) up to the time of the transferor decides to transfer the immovable property to his private wealth or until the buyer no longer exploits the transferred activity or part of immovable property or changes his activity.

Deferred depreciation

  • The linear depreciation of an asset for a given financial year could be deferred until at the latest the end of the useful life of such asset upon request of a taxpayer. This tax measure would increase the CIT due for a given year and may allow to reduce the NWT due (through allocation of a special reserve/creditable CIT liability).

Mandatory electronic filing of the corporate tax returns

  • As from the fiscal year 2017, Luxembourg corporations would have to file their CIT, MBT and NWT (form 500) by electronic means.

Increase of penalties

  • Penalties due for incomplete or inexact information included in the tax returns or non-filing of tax returns would be fixed at an amount not exceeding 25% of the taxes avoided or unduly reimbursed but not less than 5% of the taxes avoided or unduly reimbursed. " In case of late filing of CIT, MBT and NWT returns, the Luxembourg tax authorities could impose a lump sum penalty amounting up to €25,000 (instead of the current €1,240).

Value added tax (VAT)

  • Introduction of new provisions to render ipso jure or de facto managers (dirigeants de droit ou de fait) liable for the fulfilment of the VAT obligations, including the payment of the VAT due, incurred by companies which they are in charge of. This rule also applies to liquidators and receivers.
  • Introduction of personal and joint liability for the ipso jure or de facto managers, liquidators and receivers where VAT obligations have not been met and where the VAT debt has not been settled by the companies which they are in charge of.
  • Increase in late filing penalties to maximum €25,000.
  • Increase in ad valorem penalties from the current rate of 10% to 50% in the event that the payment of VAT has been evaded or where the refund of VAT is unduly obtained.
  • Introduction of specific new measures in the VAT Law and in the Criminal Code to combat VAT fraud and VAT evasion.

The bill is still to be adopted by the Parliament and will be applicable as from 1 January 2017.

Talk to us

TMF Luxembourg experts can assess the impact of the new tax measures on your business, through an attentive estimation of the yearly corporate tax due. We can prepare late tax file(s) quickly and at an unbeatable price; allowing you to mitigate the new relevant penalties. We can also take care of the electronic filing of the tax returns on your behalf and perform a compliance check of your company activities; to identify transactions that may not be compliant with the VAT law - reducing your risk of penalties. 

We can also take care of VAT registration/de-registration, preparation and electronic filing of VAT returns of the Company and its Directors/Managers, to help you meet your local compliance needs. TMF Luxembourg already files returns via the eCDF platform, which becomes standard as of 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
3 Oct 2019, Webinar, Rotterdam, Netherlands

To view this Webinar in full click here

Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions