Amendment Of Luxembourg Tax Legislation

Bill n°6497 was approved by the Luxembourg Parliament on 13 December 2012 and published in the official gazette (Memorial A) on 28 December 2012. The most salient amendments to Luxembourg tax legislation for 2013, which clearly aim to increase tax revenues, are as follows.

CORPORATIONS

Increase of the solidarity surcharge from 5% to 7%

The aggregate maximum income tax rate for companies therefore increases from 28.8% to 29.22% in Luxembourg-city, i.e. 22.47% (21% x 107%) corporate income (CIT) tax and 6.75% municipal business tax.

Substantial amendments to the minimum CIT

A EUR 1,500 minimum CIT was introduced in Luxembourg tax legislation in 2012. The minimum CIT was however applicable to – broadly – holding and financing companies only.

As from 2013, the minimum corporate tax applicable to - broadly - holding and financing companies increases from EUR 1,500 to EUR 3,000 (EUR 3,210 including solidarity surcharge) The asset test establishing the scope of such minimum CIT has been clarified.

In addition, companies out of the scope of the EUR 3,000 minimum tax are now subject to a new minimum corporate tax ranging from EUR 500 to EUR 20,000 (EUR 535 to EUR 21,400 including solidarity surcharge) depending on the balance sheet amount of the corporate taxpayer.

Balance sheet amount

Minimum CIT (EUR)

up to EUR 350,000

535

up to EUR 2,000,000

1,605

up to EUR 10,000,000

5,350

up to EUR 15,000,000

10,700

up to EUR 20,000,000

16,050

above EUR 20,000,000

21,400

The direct tax authorities announced on 21 December 2012 that value of assets exclusively taxable in another jurisdiction pursuant to a tax treaty concluded by Luxembourg would be excluded from the minimum CIT computation.

Finally, the law provides for the following clarifications and amendments in relation to the minimum CIT:

The minimum CIT is only applicable to corporate resident taxpayers. To the extent applicable, the minimum CIT is a non-refundable advance which is creditable on future CIT liabilities of the taxpayer. In the case of a tax consolidation, the aggregate minimum CIT is capped at EUR 21,400. Net worth tax reduction under Paragraph 8a of the net worth tax law is limited to the amount of corporate income tax (including solidarity surcharge) reduced by the relevant minimum CIT. INDIVIDUALS

Solidarity surcharge

Increase of the solidarity surcharge for individuals from 4% to 7%...