Circular N° 779 issued by the Luxembourg tax authority on 22
August 2016 enacted a new tax of 3% to be charged on motor
liability insurance premiums. The legislation takes effect on
1 October 2016.
2015 saw many discussions within the government, legal circle
and the insurance industry on whether another special tax should be
implemented to finance the ambulance service in
Luxembourg. At present, the ambulance service is partly
financed through the 6% special tax, known as the Fire Brigade
Charge, levied on fire insurance premiums although this tax was
aimed at funding the fire engine services through levying on the
The opinion was that by charging another special tax of 3% on
motor insurance premiums, the ambulance service would be fully
covered. This was proposed in Bill No. 6861 on the Organisation of
Civil Security and Creating a Grand Ducal Body of Fire and
Technical content of the new tax
The tax rate is 3% and charged on the net premium of the motor
liability insurance. The tax is payable by the insurer and
chargeable at the time the premium is received. As the risk
location for vehicle insurance is the location where the vehicle is
registered, insurance companies operating under freedom of services
provision will also be subject to the tax if the insurance covers a
Luxembourg- registered vehicle. The legislation also makes it clear
that when vehicles are purchased and shipped from outside of
Luxembourg into Luxembourg, and from the date the vehicles are
dispatched to the date when the purchaser receives the vehicles is
a period of thirty days; the risk location is deemed to be in
The tax must be collected and submitted by the insurer to the
tax authority Bureau d'Imposition Luxembourg III. The filing
deadline and the deadline for payment is the 15th day of the month
following the quarterly declaration period. Where the insurer has
no permanent establishment in Luxembourg, the tax is due by the tax
representative appointed by the insurer. The tax representative
shall be established in Luxembourg.
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This new tax has been updated in
IPT Quote, TMF Group's online tax calculation tool and a
news item published in IPT Quote to inform users. The new tax
is named Emergency Service Levy under Motor line of business. As
the tax is charged only on motor liability insurance, a subclass
has been created to distinguish between motor liability insurance
and motor hull insurance. In addition, premium apportionment
functionality has been configured under this tax to cater the
scenario where a combination of motor liability insurance and hull
insurance is underwritten. Users are then able to split the premium
and run the Emergency Service Levy calculation only for the
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.
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The Common Reporting Standard (CRS) has been initiated by the Organization for Economic Cooperation and Development (OECD) aiming at improving international tax compliance and preventing tax evasion, through the automatic exchange of information between the countries that implement CRS.
The DITC has stated that it will issue updated CRS Guidance Notes in the first quarter of 2017 to cover the Regulations.
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