Luxembourg: 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

A. 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 the basis of the closing balance sheet total of the concerned tax year, as follows:

2.3. Minimum tax as advance payment 

The minimum taxation is no longer a final tax but an advance tax payment on the corporate tax due in the future. However, while standard advance tax payments are refundable, the Law provides that the minimum tax will not be refunded. 

Further, minimum tax can also not be reduced by various tax credits which are listed by the Law, such as for example the investment tax credit (bonification d'impôt pour investissement), as provided for by article 152bis of the Luxembourg income tax law (1). Also, the net wealth tax reduction, as provided for by article 8a of the net wealth tax law (2), will not be available for companies which are only subject to the minimum tax. 

2.4. Implications in an international context 

There were certain interrogations by local tax practitioners as to the compatibility of the minimum taxation with international laws, in particular in scenarios where the Luxembourg corporation only holds assets which are located abroad and Luxembourg does not have the right of taxation by virtue of existing double tax treaties. 

The tax authorities have now clarified in their newsletter of 21 December 2012 that the net value of assets generating or potentially generating income which is only taxable in another State than Luxembourg by virtue of a double tax treaty are not to be taken into account when determining the balance sheet total.

This means in practice that the impact of the introduction of the new minimum tax for real estate companies holding only one or several properties located in treaty jurisdictions should be remote as it will only be assessed on the basis of the assets Luxembourg has the right to tax (cash at bank for example). Hence, property companies should in practice not be subject to the EUR 21,400 minimum tax as initially feared by the market. 

2.5. Minimum taxation for taxpayers subject to the tax unity regime (régime d'intégration fiscale

Until now, only the parent company of a tax unity was liable to the minimum tax. The Law amends this rule and henceforth the parent company will be liable for the aggregate amount of minimum taxes that would have been due by each of the companies part of the fiscal unity in the absence of the application of the tax unity regime. 

However, the aggregate amount of minimum taxation due by the parent company of the tax unity may not exceed EUR 21,400 (including the 7% solidarity surcharge). 

3. Investment tax credits 

The 7% global investment tax credit available for qualifying investments of up to EUR 150,000 is maintained. However, the additional 3% granted above this amount will be reduced to 2% and the tax credit for additional investments in qualifying assets will be reduced from 13% to 12%.

B. Tax Measures for individuals 

1. Tax allowances limitations 

(i) Individuals have so far benefited from a lump-sum tax deduction for their professional travel expenses. This tax deduction is determined based on distance units and amounted to maximum EUR 2.970 for taxpayers living more than 30 distance units from their working place. This lump-sum tax deduction is now reduced to EUR 2.574 corresponding to the withdrawal of the allowance for the first 4 distance units. 

(ii) The income tax law provides for a deduction of interest expenses which so far amounted up to EUR 672 (doubled for spouses taxed jointly). This deduction is now reduced by 50% and is so limited to EUR 336 (doubled for spouses taxed jointly). 

2. Income tax rates 

The Law increases the marginal income tax rate for individuals from currently 39% to 40%. 

The new tranche of 40% is applicable to individuals whose taxable income is higher than EUR 100,000 (EUR 200,000 in case of joint taxation). 

3. Increase of the solidarity surcharge 

As announced in our Newsletter of December 2013, the solidarity surcharge is raised by 3% for individual taxpayers. 

The surcharge is now set as from 1 January 2013 to 7% of the income tax due for Luxembourg individual taxpayers whose taxable income does not exceed EUR 150,000 (Tax Class 1 and 1a which is applicable to singles, divorced and widowed taxpayers) or EUR 300,000 (Tax Class 2 which is applicable to taxpayers taxed jointly) and to 9% of the income tax due for Luxembourg individual taxpayers whose taxable income exceeds the relevant thresholds. 

As a result thereof, the marginal tax rate (including the solidarity surcharge) is raised to respectively 42.8% and 43.6%. 

4. Stock options 

As announced during the discussions on the 2013 Budget, the Luxembourg tax authorities have issued on the 20 December 2012, an amended version of the circular L.I.R n°104/2 on the taxation of stock options, which replaces circular L.I.R n°104/2 of 11 January 2002. 

Until now, freely transferable stock options (not listed on a stock exchange) which are taxable at grant were valued for personal income tax purposes at 7.5% of the value of the underlying shares/assets (unless a valuation was realised by application of recognised valuation method, such as the valuation methods of the US economists Myron Scholes and Fischer Black or any other comparable valuation method). 

The circular is modified on this point and provides that the options are now to be valued at 17.5% of the value of the underlying shares/assets (unless a valuation based on a recognised valuation method is made). The new circular (in the same way as the former circular) does not further explain on what grounds this lump sum valuation is based. It is debatable whether such lump sum valuation could be upheld in court proceedings. 

The provisions of the circular applicable to non-freely transferable options and other employee participation plans which are taxable at exercise are not impacted by the amended circular. 

C. VAT Measures 

1. Small sized businesses 

Luxembourg VAT law (3) exempts small businesses from VAT. The threshold for being exempt amounted so far to a turnover of EUR 10,000. It is now increased to EUR 25.000. 

2. Limitation of the VAT deduction for expenses related to the main residence 

Expenses incurred for the construction, transformation or extension or renovation of the main residence is taxable at the favourable tax rate of 3%. The tax benefit is as from 2013 limited to EUR 50,000 per residence constructed/refurbished, whereas it previously amounted to EUR 60,000. 


(1) Loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu 
(2) Loi modifiée du 16 octobre 1934 concernant l'impôt sur la fortune 
(3) Loi modifiée du 12 février 1979 concernant la taxe sur la valeur ajoutée  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions