By Law of 23 December 2016, Luxembourg enacted the law
implementing the 2017 tax reform (bill of law n°7020). Compared
to the initial bill presented to parliament (
see our Tax Alert of 5 August 2016), the main key change of the
approved bill relates to the limitation of joint and personal
liability of managers and directors, for value added tax (VAT)
payments of taxable persons.
Main new tax measures
The main new tax measures, which will almost entirely enter into
force as of 1 January 2017, are the following:
The reduction of the corporate income
tax rate to 19% in 2017 and 18% in 2018. The combined corporate tax
rate in Luxembourg City will drop from 29.22% to 27.08% in 2017 and
26.01% as of 2018.
The introduction of a 17-year
limitation on the use of tax losses as of 2017.
The increase of the minimum net
wealth tax for SOPARFIs (taxable holding companies) to €4,815
The extension of the tax deferral
regime for currency gains or losses provided by Article 54 bis
The increase of tax credit for
The implementation of a deferral
mechanism for deduction for depreciation. Taxpayers will be allowed
to defer and carry forward the annual amount of depreciation on a
The modernization and strengthening
of criminal tax provision with the aggravated tax fraud offence and
the inclusion of aggravated tax fraud and tax swindling into the
list of primary money laundering offenses.
The use of loan agreements and
receivables will no longer be subject to registration and the 0.24%
ad valorem registration duty. The progressive rates will be adapted
and two new income tranches taxed respectively at 41% (as from
€150,000) and 42% (as from €200,000) have been
The repeal of the 0.5% temporary tax
to balance the state budget.
The final withholding tax on interest
paid to Luxembourg individual residents is doubled to 20%.
An option to file individual or joint
tax returns for non-resident/resident married couples has been
The increase and amendment of tax
allowances for individuals in relation to, among others, pension
and home savings.
Main amendment compared to the initial draft bill of law
The draft bill initially provided that the ipso jure or de facto
directors/managers, right holders (in case of decease or
dissolution without liquidation), liquidators, and trustees would
be jointly and personally liable for VAT payments of taxable
persons and the Luxembourg VAT authorities would be entitled to
issue a call in guarantee decision (décision d'appel
en garantie). The draft bill was amended on this point so that
now the law, as enacted, is limited to managing directors
(administrateurs délégués) or the de
jure or de facto managers in charge of the taxpayer's
day-to-day management who fail in the performance of their duties
(inexécution fautive). Persons who are
right-holders (ayants-droits), liquidators, and curators
of VAT taxable persons are now excluded from the scope of these new
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