New Tax Measures

On 21 December 2012, the Luxembourg Parliament adopted a law (the Law) which contains new tax measures applicable to both individuals and companies as from 1 January 2013. The Law also includes some local VAT measures applicable as of 1 January 2013. This News Flash summarises the most important direct and indirect tax measures included in the Law

1. New tax measures for companies

   1. Increase of the solidarity surcharge (contribution au fonds pour l'emploi) from 5% to 7%

      The solidarity surcharge rises from 5 to 7% for corporations, which increases the corporate income tax. The overall corporation taxes for corporations established in the city of Luxembourg increases from 28.80% to 29.22% (i.e. 21% corporate income tax plus 7% solidarity surcharge, plus a 6.75% municipal business tax in the city of Luxembourg).

   2. Minimum taxation

      2.1. Increase of the existing minimum tax for SOPARFIs and extension of scope to SICARs and regulated securitisation companies

      Since 2011, unregulated Luxembourg corporations whose net assets consist of more than 90% of financial assets, transferable securities and bank deposits are subject to a minimum flat tax of EUR 1,500 (EUR 1,575 including the solidarity surcharge) per annum. This minimum tax mainly concerns so-called Soparfis (fully taxable holding companies eligible for treaty protection and EU Directives).

      The Law increases this minimum tax to EUR 3,000 (EUR 3,210 including the 7% solidarity surcharge).

      Further, the scope of the existing minimum tax has been amended by the Law. The 90% threshold now also includes (i) receivables held against related parties and companies in whom the corporation holds a participation and (ii) shares or units held in a tax transparent entity. In addition, all companies who meet this threshold will be in the scope of this minimum tax, irrespective whether they are regulated or not. Hence, SICARs and regulated securitisation companies (i.e., securitisation companies which offer securities to the public on an ongoing basis) should be henceforth subject to the EUR 3,000 minimum tax.

      2.2. Introduction of a new minimum tax for companies other than those under 2.1.

      In addition to the existing minimum tax referred to under 2.1. above, the Law introduces also a minimum tax which will apply to all corporations that have their statutory seat or their central administration in Luxembourg and which are not subject to the existing minimum tax.

      The new minimum tax is determined on...