2018 Budget: Main Tax Measures

On 11 October 2017, Finance Minister Gramegna presented the 2018 budget to the Parliament. The 2018 budget draft law includes some tax measures. An additional reform is in the pipeline, with some upcoming changes to the tax regime of stock option plans. In this ATOZ Tax Alert, we summarise the main tax changes to come in 2018.

Corporate income tax measures

Scope of investment tax credit extended to the acquisition of software

The draft law extends the scope of the investment tax credit (bonification pour investissement) to the acquisition of software. However, the benefit of the investment tax credit is subject to certain conditions and limitations:

The investment tax credit only applies if the software is acquired from a third party. Therefore, acquisitions from related parties within the meaning of article 56 Income Tax Law (ITL) are excluded. It is not possible to benefit both from an intellectual property regime and from the investment tax credit for the same software. Thus, if a tax payer claims the investment tax credit benefit for the acquisition of specific software, the income generated by this software will not be able to benefit from an IP regime. The global investment tax credit amounts to 8% for the first tranche of EUR 150,000 and 2% for the tranche exceeding EUR 150,000. However, the tax credit may not exceed 10% of the tax due for the tax year during which the operating year is ending during which the acquisition was made. Scope of investment tax credit extended to the acquisition of software

The scope of the investment tax credit is extended to zero-emission cars under certain conditions.

Individual tax measures

Tax classes & non-resident tax payers

As announced this summer by the Luxembourg Government, the draft law extends the scope of situations in which non-resident tax payers will be able to be taxed in the same way as resident taxpayers (application of article 157ter ITL).

The draft law provides that non-resident taxpayers who do not have at least 90% of their worldwide income taxable in Luxembourg will still be able to be taxed in the same way as Luxembourg resident taxpayers if the portion of their foreign income which is not taxable in Luxembourg amounts to less than EUR 13,000.

In addition, when determining whether the 90% requirement is met, the part of the salary income which becomes taxable in the residence state of the taxpayer in application of a double tax treaty (because the maximum amount of days spent by...