Proposed Measures For The 2017 Tax Reform Announced By The Luxembourg Government

On 29 February, earlier than initially expected, the Luxembourg Government released its long-awaited proposals for the tax reform to be implemented in 2017, which are built on four pillars: sustainability, fairness, selectivity, and competitiveness.

The Government outlines the main measures being currently contemplated, as described below, without giving more concrete details at this stage.

Proposed tax measures for corporate taxpayers

The most significant measure is the expected decrease of the corporate income tax rate in order to reinforce the competitiveness of businesses. It would indeed go from its current rate of 21% down to 19% in 2017, and to 18% in 2018, thus leading to a global tax rate of 27.08% in 2017 and 26.01% in 2018 (for companies in Luxembourg City). Moreover, the corporate income tax rate would decrease from 20% to 15% for corporations with a taxable basis up to €25,000 in favour of start-ups and small enterprises. The minimum net wealth tax for holding companies would be increased from €3,210 to €4,815. Some limitations would be introduced to the right to carry tax losses forward. Based on information mentioned during the press conference, tax losses realised as of 2017 would indeed only (i) be available to offset up to a maximum of 80% of the taxable profits of each year and (ii) be carried forward during a certain limited period of time (expected to be set at ten years). The tax losses realised through 2016 would not be affected and could still be carried forward indefinitely. The 0.24% registration duties due on notarial deeds documenting the transfer of debt claims would be abolished. The fight against tax fraud would be strengthened with additional human resources being allocated to the tax authorities. In order to facilitate the transmission of family businesses to the next generation, capital gains on real estate assets held by family enterprises would be rolled over. Allowances for new investments made by agricultural holders would be increased. Proposed tax measures for individual taxpayers

In order to support households' purchasing power, the tax rate scale would be restructured and the 0.5% temporary budget balancing tax would be abolished. Tax credits benefiting...

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