Luxembourg’s prime minister on 26 April 2016 delivered the “state of the nation” speech, during which the prime minister highlighted some of the proposed changes to the Luxembourg tax system to be implemented in 2017.
Most of the measures had already been announced by the government in February 2016, including a progressive decrease of the rate of corporate income tax, from 21% to 18% (resulting in a “global” tax rate of approximately 26% in 2018). Other actions pledged by the government in February 2016 targeted not only the taxation of corporations, but also of individuals.
To remain competitive and to stimulate corporate investments in Luxembourg, in particular in the innovation sector, an increase in investment tax credit rates by one percentage point has been proposed. Consequently, the “complementary” and “global” investment tax credits would be increased from 12% to 13% and from 7% to 8%, respectively (while the current 2% rate for investments exceeding €150,000 would remain unchanged). The investment tax credit for assets approved for the special depreciation regime would correspondingly be increased by one percentage point, from 8% to 9% (while the current 4% rate for investments exceeding €150,000 would remain unchanged).
Concerning proposed limitations to the tax loss carryforward rules, tax losses incurred as from the tax year 2017 would only be offset against 75% of the annual taxable profit realised in future years, and the carryforward period would be limited to 17 years.
Other measures proposed for individual taxation, in addition to those announced in February 2016, include:
Read an April 2016 report prepared by the KPMG member firm in Luxembourg: New tax measures announced for the Luxembourg 2017 tax reform
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