Thursday, 17 March 2016

Luxembourg: Plans for 2017 tax changes announced

The Luxembourg government announced a number of measures on 29 February 2016 that it intends to include in the 2017 tax reform. The final plans for the reform will be released during the prime minister’s annual speech on 26 April 2016.
The main changes to be proposed for corporations are as follows:

  • The corporate income tax rate would be reduced from the current 21% to 19% in 2017 and 18% in 2018 to enhance competitiveness. The current effective income tax rate is 29.22%, including the corporate income tax, municipal business tax (for Luxembourg City) and the contribution to the unemployment fund; this effective tax rate would decrease to 27.08% in 2017 and 26.01% in 2018.
  • To encourage innovative young companies, a reduced corporate income tax rate of 15% would be introduced for corporations whose annual taxable income does not exceed EUR 25,000.
  • The recently introduced minimum net wealth tax (that replaces the minimum corporate tax and that applies to all corporate entities whose statutory seat or central administration is in Luxembourg) would be increased from EUR 3,210 to EUR 4,815 for SOPARFIs.
  • The utilization of loss carryforwards would be limited to 10 years (currently unlimited), and other restrictions could be introduced.
  • To facilitate the transfer of family-owned companies, capital gains derived from immovable property (land or buildings) belonging to the divested business would be exempt if certain conditions are satisfied.
  • The 0.24% registration duty levied on the transfer of debt would be abolished. 

Source: Deloitte