ATOZ Insights - December 2017

Getting in the mood of the season's celebrations, the Luxembourg authorities, as is their custom, have put few tax reforms under the Christmas tree.

Indeed, 2017 is nearly behind us, 2018 is in the air, and coming with it is the budget law which brings along some new tax measures. The 2018 budget introduces measures on the investment tax credit, tax classes and non-resident taxpayers and the temporary reduced taxation of capital gains on sale of real estate. In addition, the Luxembourg tax regime of warrant plans has been amended by means of an administrative circular on 29 November 2017. This circular introduces an increase of the taxable basis of warrant plans, clarifies the conditions for employees to be eligible for the tax regime defined in the circular and amends the reporting obligations. We analyse below both the tax provisions of the 2018 budget law and the circular on warrant plans.

The Luxembourg authorities have also recently released a new circular on the conditions applicable to the Luxembourg undertakings for collective investment for obtaining a tax residence certificate. It confirms notably that RAIFs benefiting from the same tax regime as SIFs will be able to get a tax residence certificate and specifies under which conditions.

Luxembourg is also working to comply with its European obligations. As a result, the Luxembourg cost sharing VAT exemption regime (also referred to as "Independent Group of Persons") has been repealed by a Grand Ducal Decree published on 23 November 2017 and a Circular from the VAT authorities dated 7 December 2017. Consequently, Luxembourg is now compliant with the position of the Court of Justice of the European Union on this topic. The Luxembourg authorities are also working on various bills of law aiming to transpose the 4th anti-money laundering (AML) Directive into national law and amending, among others, the Luxembourg AML law of 2004. Finally, the European Directive on double taxation dispute resolution mechanisms, according to which European Member States will have to efficiently resolve double taxation disputes, has been approved. Luxembourg has until 30 June 2019 to implement the Directive into its laws and regulations.

Noticeably absent under the 2017 "Christmas tax tree" is the new IP regime for which a draft law was released at the beginning of August which has still not become law. However, we expect that the new regime will be adopted beginning of the New Year with effect as from New...