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Luxembourg budget 2013 voted - 18/12/2012


After revised forecasts and intensive discussions regarding how to generate additional tax revenue without discouraging investment, the Luxembourg deputies voted to approve the amended 2013 tax measures last Thursday.

The Luxembourg legislative process should come to an end shortly and the tax measures should apply as from 1 January 2013.

Most of the tax measures proposed by the Government in October and November were adopted (increase of the Employment Fund surcharge, increase of the individual income tax, reductions of the tax credit on investments, etc.). Please refer to our previous Tax Alerts dated 7 November 2012 and 9 November 2012.
Nevertheless, the initial proposals in connection with the minimum income tax and the reduction of the Net Wealth Tax were amended during the legislative process. These changes demonstrate, once again, the willingness of Luxembourg to ensure it remains an attractive destination for international business.  

A recasting of the minimum income tax

As from 1 January 2013, the much-discussed minimum income tax will be designed as follows:

  • All collective entities having their statutory seat or central administration in Luxembourg (hereafter “Luxembourg collective entities”) will be liable to the minimum income tax. Therefore, for example, Luxembourg permanent establishments of foreign companies will be out of the scope of this tax.
  • The Luxembourg collective entities holding mainly financial assets (total of financial assets, transferable securities and cash exceed 90% of the total balance sheet) will be liable to a minimum income tax of €3,210 (taking into account the Employment Fund surcharge). This now also includes those entities meeting the 90% threshold test that are subject to approval of a minister or supervisory authority (SICAR, etc.).
    Interests held in tax transparent partnerships will be deemed to be registered in the balance sheet to accounts 231 and 233 and will be taken into account for the purposes of the 90% threshold test.
  • The other Luxembourg collective entities (broadly meaning operational companies) will be subject to a progressive minimum income tax depending on the total assets on their balance sheets. The tax will range from €535 (for a total balance sheet up to €350,000) to €21,400 (for total balance sheet exceeding €20,000,000), including the Employment Fund surcharge.
  • Where Luxembourg collective entities are under the tax consolidation regime, all entities will be subject to the minimum income tax (payable by the parent entity). Nevertheless, the aggregate amount due under a tax consolidated group will be limited to €21,400 (including the Employment Fund surcharge).
  • The minimum income tax will be viewed as an advance on the Corporate Income Tax due in the future. In practice, the minimum income tax is due when the Luxembourg collective entities are in a tax loss position or paying less than the minimum income tax. Therefore, in those cases, the amount paid will be creditable against future Corporate Income Tax without time limit. It should be noted that the minimum income tax will not be reimbursed by the Luxembourg tax authorities.
  • The minimum income tax cannot be reduced by tax credits (such as for investments, recruitment of unemployment persons, etc.).

An adaptation of the reduction of the Net Wealth Tax

The calculation will still be done before any tax credits (and not after any tax credits as initially proposed in the draft law). Nevertheless, the minimum income tax will not be taken into account for the Net Wealth Tax reduction.

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