Luxembourg: Tax reform for 2017, bill submitted to parliament

Luxembourg: Tax reform for 2017, bill submitted

The Luxembourg government filed draft legislation with the parliament to implement tax reform, as announced earlier this year. There are proposals that would affect corporate taxpayers and individual taxpayers.

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In general, the measures are expected to be effective 1 January 2017 (with some exceptions).

Measures affecting corporate taxpayers

  • The corporate income tax rate would be reduced to 19% in 2017, and to 18% from 2018.
  • For income tax and municipal business tax purposes, the carryforward of tax losses incurred as from 1 January 2017 would be limited to 17 years. 
  • There would be an increase the complementary and global investment tax credits 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 be increased from 8% to 9% (while the current 4% rate for investments exceeding €150,000 would remain unchanged).
  • The investment tax credit would be applicable to investments made in another Member State of the European Economic Area (EEA).
  • The tax credit for hiring of unemployed persons would be extended until the end of 2019.
  • The ability to neutralise exchange gains would be extended to all companies that have their capital in a foreign currency, effective from 1 January 2016. 
  • Taxpayers would be allowed to defer, by election, the deduction of the annual amount of depreciation of an asset. The unused depreciation amount could be carried forward (and would have to be used at the latest at the end of the useful lifetime). 
  • Provisions booked by certain financial institutions to provide for a guarantee of certain bank deposits would no longer be tax-deductible, on a phased-in schedule.
  • The 0.24% registration duty due on notarial deeds documenting the transfer of debt agreements would be repealed.
  • To facilitate the transmission of an individual business to the next family generation or to employees, a tax deferral would be introduced for the capital gain realised on real estate assets (land and buildings) held by the enterprise (under certain conditions). 
  • The amount of the minimum net wealth tax (NWT) for resident companies carrying out holding and/or financing activities would be increased by 50%, from €3,210 to €4,815. 
  • Capital companies would be required to file electronically their corporate income tax, municipal business tax, and net wealth tax returns as from the tax year 2017.
  • Directors, liquidators, and trustees would be regarded as jointly and personally liable for the value added tax (VAT) payment of the taxable persons they administrate or manage. 
  • Reinforcement of the fight against tax fraud and money laundering


Read a July 2016 report prepared by the KPMG member firm in Luxembourg

Measures affecting individual taxpayers

  • Repeal of the 0.5% temporary tax for the budget balance 
  • Tax rate revisions, with a marginal tax rate of 41% introduced on the portion of annual income of €150,000 or more and a 42% rate introduced for singles on the portion of annual income of €200,004 or more (for taxpayers in tax class 1)
  • Options for individual taxation of couples and registered partners, to be taxed individually 
  • Final withholding tax on interest paid out to Luxembourg resident individuals (RELIBI) would be increased from 10% to 20%
  • An increased face value of lunch vouchers 
  • Family-related tax measures, including an increased tax credit granted to single parents, increased deductible amount of education allowance for children, and increased tax credits or deductions for pension premiums
  • Taxation of non-residents to be substantially amended
  • Increased deductible contributions for home savings plans, and increased deductions for mortgage interest
  • Increased car allowance for zero-emission vehicles purchased by a private individual and changes to the monthly valuation of the salaried benefit-in-kind for company cars 
  • Tax deferral on the transmission of individual businesses to the next family generation 
  • Self-employed persons no longer be exempt from keeping accounting records
  • Tax amnesty available for corrective income tax returns filed between until 31 December 2017 if the amount of tax due (including an increase of the tax due of 10%, for a regularization in 2016, or 20% in 2017) is paid within one month following the receipt of the revised tax assessment


Read a July 2016 report prepared by the KPMG member firm in Luxembourg

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