Luxembourg: New Bill On Luxembourg 2017 Tax Reform

Bill of law n°7020 amends and confirms the new tax measures previously announced:

1. Corporate income tax (CIT)

1.1 Introduction of a 17 year limitation on the use of tax losses as from 2017

The limitation will apply from 2017. Tax losses generated until December 31, 2016 can continue to be carried forward indefinitely. The oldest tax losses would be offset first.

The current proposal for the limitation in time to 17 years is good news as it was initially announced that tax losses generated after 2016 would be useable for a shorter period of time (10 years) and only up to a certain percentage (e.g. 80%) of the taxable profit per year. Even if the draft bill may still be subject to amendments, we believe that the limitation of the use of the tax losses to a certain percentage of the taxable profit will be very likely abandoned.

1.2 Reduction of the corporate income tax rate to 19% in 2017 and 18% in 2018

As announced, the corporate income tax rate will be reduced from 21% to 19% from 1 January, 2017 and 18% from 1 January, 2018 for companies having an annual taxable income of more than €30,000. Assuming that the contribution for the employment insurance of 7% and the municipal business tax in Luxembourg of 6,75% remain unchanged, the combined corporate tax rate in Luxembourg City will drop from 29.22% to 27.08% in 2017 (19x1.07+6.75) and 26.01% as from 2018 (19x1.07+6.75).

The reduced rate of 20% currently applicable for companies with an annual taxable profit of up to €15,000 has been decreased to 15% and the taxable profit threshold will be €25,000.

As the 19% rate for 2017 (18% as from 2018) will apply to companies having taxable profit higher than €30,000, an intermediate taxation level is provided for taxpayers with a taxable income between €25,000 and €30,000. The tax due will be equal to €3,750 (15% of €25,000) + 39% of the taxable income exceeding €25,000 for 2017 and €3,750 + 33% of the taxable income exceeding €30,000 for 2018.

The Luxembourg Government confirmed that it will closely follow the European and International situation in light of the implementation of the OCED's BEPS rules to envisage, if need be, an additional adjustment. The commentaries on the draft bill also recall Luxembourg's intention of maintaining a competitive international tax environment.

1.3 Extension of the tax deferral regime for currency gain or loss regime provided by article 54 bis LITL

A new version of article 54 bis LITL will allow a tax deferral on capital gains or capital losses realized by all corporate taxpayers that have a share capital in another currency than Euro.

The rule will be retroactively applicable as of 1 January, 2016. Currently, the neutralization of exchange gains is reserved to certain entities (financial institutions, professional custodians, and insurance/re-insurance companies). A request will have to be filed at least 3 months before the end of the first tax year for which the benefit of the tax neutralization is expected.

1.4 Increase of tax credit for investments

The tax credit regime for investments will improve as follows:

  • The tax credit for additional investments will increase from 12% to 13% of the investment.
  • The tax credit for global investments will increase from 7% to 8% for investments up to €150,000. The current 2% rate for investments exceeding €150,000 would remain unchanged.
  • The tax credit for investment in assets approved for the special depreciation regime will increase from 8% to 9% for investments up to €150,000. The current 4% rate for investments exceeding €150,000 will remain unchanged.

Finally, in line with the Luxembourg administrative practice in force since the Tankreederei I case law (C287/101) of the European Court of Justice, the investment tax credit will also apply to investments made in another Member State of the European Economic Area (EEA) (i.e. EU member states, Iceland, Liechtenstein, and Norway).

1.5 Implementation of a deferral mechanism for deduction for depreciation

Taxpayers will be allowed to defer and carry forward the annual amount of depreciation on an asset.

1.6 Implementation of a tax deferral mechanism for family businesses

Latent gains in relation to real estate assets that are part of the net assets transferred will be deferred as long as they are still held and the business is continued

2. Net wealth tax (NWT)

2.1 Minimum NWT increased

The minimum NWT for SOPARFIs (taxable holding companies) will be increased to €4,815 per year.

The minimum NWT has replaced the minimum corporate income tax since 1 January, 2016.

2.2 Clarification relating to the maintenance of the NWT reserve

The NWT reserve allows a reduction of the NWT liabilities provided that the reserve is maintained in the accounts of the taxpayer for 5 years. The draft bill will formally allow keeping the benefit of the NWT reduction if the NWT reserve is effectively maintained up to 5 years when transferred into another entity in case of liquidation, merger and migration out of Luxembourg.

3. Procedure /tax compliance

3.1 Modernization and strengthening of criminal tax provision with the aggravated tax fraud offence and the inclusion of aggravated tax fraud and tax swindling into the list of primary money laundering offenses

Based on the draft bill, there will be three types of offences applicable for direct and indirect tax purposes:

  • Simple tax fraud, which would be an administrative offence prosecuted by the Luxembourg tax authorities (with administrative court recourse for direct taxes and civil court recourse for indirect taxes).
  • Aggravated tax fraud when the amount of the tax evaded is substantial, which would be a criminal offence prosecuted by the public prosecutor;
  • Tax swindling which is also a criminal offence (remains unchanged).

The Luxembourg criminal code will also be amended to include aggravated tax fraud and tax swindling as primary money laundering offences.

3.2 Company direct tax returns: electronic filing will become compulsory and penalties will be introduced or reinforced

  • The electronic filing of direct tax returns (corporate income tax, net wealth tax, and net wealth tax) will be compulsory for companies as from 2017.
  • The filing of a deliberately incomplete or incorrect direct tax return and the non-filing of direct tax returns should be subject to an administrative fine. The fine depends on the amount of the understated tax (or unduly reimbursed tax) and should range between 5% and 25% of that amount (also applicable for individual taxpayers).
  • Penalties for late filing of direct tax returns will be increased to a maximum amount of €25,000 that could be charged every 3 months (also applicable for individual taxpayers).

3.3 Self-employed persons ("professions libérales") earning €100,000 or more in annual turnover will no longer be exempt from keeping accounting records.

4. Individual taxpayers:

  • The final withholding tax on interest paid to Luxembourg individual resident will be doubled to 20%.
  • The 0.5% temporary tax to balance the state budget will be removed in 2017.
  • Progression rates will be adapted and an income tranche taxed at 41% (as from €150,000) and another one taxed at 42% (as from €200,000) will be introduced.
  • An option to file for individual or joint taxation tax returns for non-resident/resident married couples will be introduced.
  • Other tax allowances for individuals are proposed in relation to, among others, pension and home savings.

5. Indirect taxes

  • The ipso jure or de facto directors/managers, right holders (in case of decease or dissolution without liquidation), liquidators, and trustees will be jointly and personally liable for the value added tax (VAT) payment of the taxable persons and the Luxembourg VAT authorities will be entitled to issue a call in guarantee decision ("décision d'appel en garantie").
  • Repeal of the 0.24% ad valorem registration duty (for the use of debt/receivable)

Currently, an agreement under private seal such as a loan agreement is not mandatorily subject to registration and registration duties resulting from such registration. However, when the receivable is used (e.g. in a notarial deed for a contribution in kind or produced in justice in front of a court or an official authority in Luxembourg), such document needs to be registered, triggering a 0.24% registration duty on the amount of the receivable.

The draft bill proposes to solely register those used documents, which must be mandatorily registered by law. Consequently the use of loan agreements and receivables will be no longer subject to registration and the 0.24% ad valorem registration duty.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

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