Luxembourg: ATOZ Insights - December 2017

Last Updated: 19 December 2018
Article by Atoz Tax Advisers
Most Read Contributor in Luxembourg, December 2018

Getting in the mood of the season's celebrations, the Luxembourg authorities, as is their custom, have put few tax reforms under the Christmas tree.

Indeed, 2017 is nearly behind us, 2018 is in the air, and coming with it is the budget law which brings along some new tax measures. The 2018 budget introduces measures on the investment tax credit, tax classes and non-resident taxpayers and the temporary reduced taxation of capital gains on sale of real estate. In addition, the Luxembourg tax regime of warrant plans has been amended by means of an administrative circular on 29 November 2017. This circular introduces an increase of the taxable basis of warrant plans, clarifies the conditions for employees to be eligible for the tax regime defined in the circular and amends the reporting obligations. We analyse below both the tax provisions of the 2018 budget law and the circular on warrant plans.

The Luxembourg authorities have also recently released a new circular on the conditions applicable to the Luxembourg undertakings for collective investment for obtaining a tax residence certificate. It confirms notably that RAIFs benefiting from the same tax regime as SIFs will be able to get a tax residence certificate and specifies under which conditions.

Luxembourg is also working to comply with its European obligations. As a result, the Luxembourg cost sharing VAT exemption regime (also referred to as "Independent Group of Persons") has been repealed by a Grand Ducal Decree published on 23 November 2017 and a Circular from the VAT authorities dated 7 December 2017. Consequently, Luxembourg is now compliant with the position of the Court of Justice of the European Union on this topic. The Luxembourg authorities are also working on various bills of law aiming to transpose the 4th anti-money laundering (AML) Directive into national law and amending, among others, the Luxembourg AML law of 2004. Finally, the European Directive on double taxation dispute resolution mechanisms, according to which European Member States will have to efficiently resolve double taxation disputes, has been approved. Luxembourg has until 30 June 2019 to implement the Directive into its laws and regulations.

Noticeably absent under the 2017 "Christmas tax tree" is the new IP regime for which a draft law was released at the beginning of August which has still not become law. However, we expect that the new regime will be adopted beginning of the New Year with effect as from New Year's Day.



  • Measures in corporate tax include the extension of the scope of the investment tax credit to software acquisition as well as zero-emission vehicles.
  • For individual taxation, under certain conditions, non-resident and resident taxpayers will now be able to be taxed in the same manner. Married couples may also now choose to be taxed jointly or separately, and a tax credit for individuals of maximum 2,500 euros is now extended to plug-in hybrid vehicles.
  • Other measures include an extension of the scope of the VAT exemption for fund management services to the management of internal collective life insurance funds, as well as an extension of the reduced rate on capital gains realised on the sale of real estate.

On 14 December 2017, the 2018 budget law was passed by the Luxembourg Parliament. The 2018 budget law includes some important tax measures.

Corporate income tax measures

Scope of investment tax credit extended to the acquisition of software

The law extends the scope of the investment tax credit (bonification pour investissement) to the acquisition of software. However, the benefit of the investment tax credit is subject to certain conditions and limitations:

  • The investment tax credit only applies if the software is acquired from a third party. Therefore, acquisitions from related parties within the meaning of Article 56 Income Tax Law ("ITL") are excluded.
  • It is not possible to benefit both from an intellectual property regime and from the investment tax credit for the same software. Thus, if a taxpayer claims the investment tax credit benefit for the acquisition of specific software, the income generated by this software will not be able to benefit from an IP regime.
  • The global investment tax credit amounts to 8% for the first tranche of EUR 150,000 and 2% for the tranche exceeding EUR 150,000. However, the tax credit may not exceed 10% of the tax due for the tax year during which the operating year is ending, during which the acquisition was made.

Scope of investment tax credit extended to eco-friendly vehicles

The scope of the investment tax credit is extended to zero-emission cars under certain conditions.

Individual tax measures

Tax classes & non-resident taxpayers

As announced this summer by the Luxembourg Government, the law extends the scope of situations in which non-resident taxpayers will be able to be taxed in the same way as resident taxpayers (application of Article 157ter ITL).

The law provides that non-resident taxpayers who do not have at least 90% of their worldwide income taxable in Luxembourg will still be able to be taxed in the same way as Luxembourg resident taxpayers if the portion of their foreign income which is not taxable in Luxembourg amounts to less than EUR 13,000.

In addition, when determining whether the 90% requirement is met, the part of the salary income which becomes taxable in the residence State of the taxpayer in application of a double tax treaty (because the maximum amount of days spent by the taxpayer outside of Luxembourg, as provided by the tax treaty, is exceeded) is disregarded. This means that the part of the salary which is taxed in the residence State of the taxpayer is still assimilated to income taxable in Luxembourg in order to determine whether the 90% requirement is met. However, this applies only up to a maximum of 50 days spent outside of Luxembourg.

Finally, the law on the 2017 tax reform has granted married couples as of tax year 2018 the possibility to choose whether they would like to continue being taxed collectively in tax class 2 or whether they would like to be taxed separately. To complement this measure and provide married couples with more flexibility, the law provides that married couples will have until 31 March of the tax year following the tax year concerned (i.e. 31 March 2019 for tax year 2018) to make their choice.

Tax deduction for eco-friendly vehicles extended to plug-in hybrid electric vehicles

The tax deduction introduced last year for eco-friendly vehicles is extended to plug-in hybrid electric vehicles. The maximum tax credit amount applicable to these vehicles will be EUR 2,500.

Other measures of the law

Amendments to the rules on exchange of information upon request postponed

Following the decision of the Court of Justice of the European Union ("CJEU") in the Berlioz case (C-682/15), the Luxembourg rules on exchange of information upon request have to be amended in order to bring them in line with EU law.

In its initial form as released in October, the 2018 budget draft law included some amendments to the law of 25 November 2014 on the procedure of exchange of information upon request in order to take into account the conclusions of the CJEU in the Berlioz case.

However, following the opposition raised by the Luxembourg State Council on some of the amendments proposed, it has finally been decided to remove all provisions amending the law of 25 November 2014 and to deal with these changes in a separate draft law, which has very recently been adopted by the Government but not yet published at the time of the drafting of this article.

VAT changes

Some provisions of the VAT law will be amended, including the extension of the scope of the VAT exemption applicable to fund management services (article 44, § 1, d, of the VAT law) to the management of internal collective life insurance funds (fonds d'investissement internes collectifs d'assurance-vie) under certain conditions.

Extension of temporary reduced taxation of capital gains on sale of real estate

The temporary tax measure on the individual tax treatment of long term capital gains realised on the sale of real estate assets is extended until 31 December 2018.

This temporary measure was introduced in 2016 in order to improve the access to housing and provides that long term capital gains (i.e. capital gains realised after more than 2 years following the acquisition) realised between 1 July 2016 and 31 December 2017 are considered as an "extraordinary income" and are taxed at 1/4 of the rate otherwise applicable in accordance with the Luxembourg income tax law.

The 2018 budget law extends the application of this measure until 31 December 2018.

Other announcements - Warrant plans

During the presentation of the 2018 budget, a reform to the tax regime of warrant plans has been announced by Finance Minister Gramegna. Whereas a draft law was initially expected to be released in order to amend the regime, the Government announced later on that the change will be made by means of a circular, which was released on 29 November 2017. We present the changes introduced by the new circular in our dedicated article of these ATOZ Insights (see page 9).

To read this Newsletter in full, please click here.

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

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

Similar Articles
Relevancy Powered by MondaqAI
ELVINGER HOSS PRUSSEN, société anonyme
ELVINGER HOSS PRUSSEN, société anonyme
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
ELVINGER HOSS PRUSSEN, société anonyme
ELVINGER HOSS PRUSSEN, société anonyme
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must 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 (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

To Use 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.


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.


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