February 2016 | Luxembourg Tax Update

During 2017, several changes in the Luxembourg Tax Law are expected to be in order with the EU rules and OECD decisions.

CIT of 15% | A gradual reduction of the corporate income tax (CIT) to 15% is planned. If the municipal business tax (MBT) and rate of the solidarity surcharge remain unchanged, the new income tax rate for corporations would be 22.80%.

Net Wealth Tax Reduction

✓Assets exceeding €500 million will be applicable to 0,05% Net Wealth Tax.

✓Assets below €500 million still will be applicable to 0,5%, this remains unchanged.

Minimum CIT will be replaced by minimum NWT

✓ Companies with a total balance sheet higher than €30.000.000 and a sum of fixed financial assets, transferable securities and cash at bank below 90% of the total balance sheet, will be applicable to €32.100 NWT.

✓ For the minimum CIT, assets which are exempt from NWT by application of a tax treaty are excluded from the balance sheet when computing the total balance sheet and the percentage of certain financial assets.

✓ The minimum NWT is reduced by an amount equal to the CIT.

✓ Securitisation vehicles, SIVARs, SEPCAVs and ASSEPs having a corporate form are liable to NWT.

New Provisions of the Parent-Subsidiary Regime

✓ Dividends and other profit distributions paid by qualifying subsidiaries to their Luxembourg parent company will no longer be tax exempt to the extent that such distributions are deductible a the level of the subsidiary.

✓ An anti-abuse rule has been introduced. Luxembourg will not grand the benefit of the Parent-Subsidiary Directive to arrangement(s) that have been put in place to obtain tax advantages instead of commercial reasons.

No IP Regime as of July 1, 2016

✓ The IP regime that provided exemption from CIT and MBT of 80% of net income and 100% exemption of NWT of the IP will be abolished be July 1, 2016. A grandfathering for IP rights developed or acquired before July 1, 2016 will be introduced. These IP rights will continue to benefit from the existing IP regime until June 30, 2021.

Tax Unity

✓ As of 2016, each member of the tax unity is fully liable for CIT and MBT.

Maritime Investment Tax Credit

✓ The Government agreed to enlarge the scope of the investment tax credit (+/-14% of the acquisition price of eligible assets) to lessors for vessels used in international traffic.