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Corporate Tax pocket guide 2013 - Instant access to the Luxembourg tax legislation | Whitepaper


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Our tax guide is designed to inform you on the main company taxes in respect of the Luxembourg tax legislation. This flyer describes briefly the main Luxembourg corporate taxes (CIT, MBT, VAT, NWT..) and the legal deadlines in matter of administrative requirements.

Corporate Income Tax (CIT)

Taxable base

CIT is calculated based on the profit according to the commercial balance sheet. Certain types of income are exempt and certain charges are non-deductible.

Exempt income

Corporate Tax pocket guide 2013 - Instant access to the Luxembourg tax legislation

  • Parent-subsidiary exemption
    Dividends or capital gains received by a Luxembourg entity from a shareholding will be fully exempt from Luxembourg corporate income tax and municipal business tax if:
    • The entity deriving such income holds or commits itself to hold directly or indirectly this shareholding for an uninterrupted period of at least 12 months
    • The shareholding threshold does not fall below either a 10% participation or a €1,2 million acquisition price (€6 million for capital gains) throughout the period
    • Qualifying recipient and distributing/disposed entities are listed in article 166 of the Income Tax Law (ITL) and within the Grand Ducal Decree dated 21st December 2001
  • Exemption from withholding tax
    Dividends distributed by a Luxembourg entity will be exempt from Luxembourg withholding tax if:
    • The entity receiving such income holds or commits to hold directly or indirectly its shareholding in the Luxembourg entity for an uninterrupted period of at least 12 months
    • The shareholding threshold does not fall below either a 10% participation or a €1,2 million acquisition price throughout that period
    • Qualifying recipient and distributing entities are listed in article 147 ITL. This regime has been widened as from 1st January 2009 and now applies to fully taxable parent companies, resident in a country having a tax treaty with Luxembourg
      and subject to a tax similar to the Luxembourg CIT
  • Exempt incomes due to double tax treaty provisions
    Luxembourg treaty network usually provides for exemption of dividends, foreign branch and real estate income, etc.
  • Exemption of dividends
    An exemption of 50% is granted on the dividend income received from a resident fully taxable capital company, a company falling within the scope of the Parent Subsidiary Directive or a capital company resident of a state, with which the Grand Duchy has a double tax treaty and which is subject to a tax corresponding to the Luxembourg CIT
  • Exemption of intellectual property income
    80% of income resulting from the exploitation of intellectual property rights acquired or registered after December 31st, 2007 and 80% of the capital gains arising from such assets are exempt

Deductions

Companies may only deduct expenses exclusively caused by enterprise to the extent that they are not connected with exempt income.

Other deductions

  • Gifts and donations
  • Losses carried forward indefinitely (but not carried back) without any amount restriction, etc.

Non-deductible expenses

  • Directors’ fees
  • Non-deductible taxes (CIT, MBT, NWT), etc.
  • Expenses in connection with exempt income
  • Fines

Tax rate applicable

Taxable income (€) Rates (increased by a 7% unemployment fund contribution)
< 15,000.00 20% (21,4%)
> 15,000.00 21% (22.47%)

Alternative minimum tax

Such tax will be due when Luxembourg collective entities are in a tax loss position or paying less than the minimum income tax. The amount paid will be creditable against future corporate income tax without time limit. This tax applies as follows:

  • Collectives entities (irrespective whether they are regulated or not) that have qualifying holding and financing assets, exceeding 90% of their balance sheet, are liable to a minimum flat income tax
    € 3,210 including the unemployment fund contribution
  • Other companies are subject to a progressive minimum income tax depending on the total assets on their balance sheet. Such 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 unemployment fund contribution

Tax reliefs

  • Credit for audiovisual or venture capital investments
  • Credit for hiring unemployed individuals
  • Credit for investment in continued professional education
  • Incentives for research and development
  • Investment tax credit
  • Foreign withholding taxes, etc.

Learn more about Municipal Business Tax (MBT), effective income tax rate, tax consolidation, registration tax, Net Worth Tax (NWT), the tax treaty network, withholding taxes, special tax regimes, administrative requirements, deferment of tax payment and VAT in the PDF attached above.

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