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23 November 2015

Luxembourg company tax changes

Luxembourg government announces new tax laws

The Luxembourg Government presented its 2016 Budget on October 14 and it contained a number of new tax laws to be introduced for Luxembourg companies across 2015 and 2016. In addition there was a proposed bill for the staggered reduction of the Luxembourg company corporate rate, which is likely to come into effect in 2017.

Two important draft laws are The Bill n. 6891, which will amend the net wealth tax ("NWT") regime and the Budget Bill which will revoke the Duchy's existing intellectual property regime. However, for existing beneficiaries of the current IP regime, changes will not come into effect until 2021.

Many of the measures are being taken in order to satisfy the European Commission and to ensure Luxembourg is compliant with the EU Directives and international standards. Two important aspect of this are the plans to:

  • replace the current minimum corporate income tax rate with a comparable minimum net wealth tax, and

  • replace the existing Intellectual Property Right incentive (IP Box) with one regime which would be acceptable following the principles recently proposed by the OECD under the BEPS 5 (nexus approach)

The changes are important because they should ensure that Luxembourg remains in line with EU rules while continuing to offer favourable taxation laws for Luxembourg companies and individuals of high net worth.

These modifications should be taken into consideration for many types of investors, including the ones in the SICARs (société d'investissement en capital à risque), securitisation companies and SEPCAVs; all of which will be subject to the new minimum net wealth tax.

 

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