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Amended Luxembourg Budget 2013 presented by the Government - 07/11/2012


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The Luxembourg’s Finance Minister presented the 2013 budget draft law at the beginning of October. However, due to the current economic climate, Luxembourg's Finance Minister presented yesterday a revised version of the budget to realise additional cost savings, which includes a brief description of additional tax measures.

Key tax measures for 2013 proposed by the Finance Minister are summarised as follows:

For companies

  • Increase of the Employment fund surcharge “Impôt de solidarité”
    Currently, a surcharge is levied on the final income tax due by companies (as well as individuals) to finance the Employment fund.
    The surcharge will be raised from 5% to 7%, which increases the combined income tax rate (Corporate Income Tax, Municipal Income Tax and Employment fund surcharge) from 28,80% to 29,22% for companies located in Luxembourg city.
  • Increase of the minimum flat income tax on finance and holding companies “Soparfi”
    The minimum flat income tax on finance and holding companies will be increased from €1,500 to €3,000.
  • Introduction of a minimum tax on enterprises
    A new minimum tax on enterprises “taxe administrative” will range from €500 to €20,000 and may depend on turnover criteria.
  • Reduction of tax credits on investments
    Tax credits for investments will be reduced (from 13% to 12% for increasing investments and from 3% to 2% for global investment above €150,000).

For individuals

  • Increase of the upper tax rate
    Currently, the upper tax rate is 39% for individuals (excluding the Employment fund surcharge) and applies to income above €41.793 for single taxpayers (class 1) and above €83.586 for couples taxed jointly (class 2).
    A 40% upper tax rate will be added and will apply to income above €100,000 for single taxpayers (class 1) and above €200.000 for couples taxed jointly (class 2).
  • Increase of the Employment fund surcharge “Impôt de solidarité”
    As for companies, the Employment fund surcharge for individuals will increase from 4% to 7% (for income not exceeding €150.000 or €300.000 for couples taxed jointly) and from 6% to 9% (for the portion of income exceeding €150.000 or €300.000 for couples taxed jointly). The upper marginal tax rate will therefore increase to 43,60%.
  • Modification of the taxation of stock options
    The taxation regime of stock options is detailed in a Circular of the Luxembourg tax authorities of 2002 (Circular LIR n°104/2 of January 11, 2002). The Government proposes to limit the scope of this Circular. No further information on the nature of the limitation is available at the moment.
  • Other measures
    Lump sum deduction for travel expenses (employees): the minimum deduction for the first 4 km (€396 per annum) will be abolished.
    Deduction for debt interest as special expenses: the ceiling will be lowered from €672 to €336 per member of the taxpayer’s household.

The new rules will be further presented by the Government and discussed by the Luxembourg Parliament in December.

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