On 7 November 2012, the government deposited a bill of law with the Luxembourg Parliament introducing the tax-related measures formerly announced. Subject to amendments which may be made during the legislative procedure, the proposed amendments will in principle apply as from 1 January 2013. An updated newsletter will be published when the law is adopted.
1. Increase of the minimum tax for Soparfis
At the same time the minimum tax to be paid by Soparfis shall be increased from 1,500 euros to 3,000 euros (plus the solidarity surcharge of 7%). The overall tax shall henceforth be 3,210 euros.
The minimum taxation will be due by each entity regardless of whether it is part of a fiscal unity or not and certain domestic tax credits will no longer be deductible from the minimum taxation.
2. Introduction of a minimum taxation for all other Luxembourg companies and non-resident corporates holding assets in Luxembourg
Whereas previously, a lump-sum tax was only imposed on unregulated Luxembourg resident entities with a collective character ("organismes à caractère collectif") holding certain financial assets (so-called Soparfis), it is now contemplated to introduce a minimum corporate income tax on all Luxembourg-resident entities with a collective character or non-Luxembourg resident entities holding Luxembourg assets via a Luxembourg permanent establishment or with no such permanent establishment (e.g. real estate).
The bill of law introduces a minimum taxation the amount of which will depend on the total closing statutory balance sheet of the relevant taxpayer and will range between 500 euros and 20,000 euros (plus a solidarity surcharge of 7%). As such, for taxpayers with a total closing balance sheet of maximum 50,000 euros, the minimum tax will amount to 500 euros and it will be capped at 20,000 euros for entities whose total closing commercial balance sheet amounts to at least 20 million euros.
3. Reduction of the tax credit for investments (bonification d'impôts pour investissement)
After having been increased last year, the tax credit for investments will be reduced as from 1 January 2013 by 1%.
4. Increase of the marginal tax rate for Luxembourg-resident individual taxpayers
It is proposed to increase the marginal tax rate for Luxembourg-resident individual taxpayers with taxable income exceeding 100,000 euros to 40%.
5. Increase of the so-called "solidarity surcharge"
The solidarity surcharge will be increased for both Luxembourg-resident individual and corporate taxpayers.
5.1 Luxembourg-resident corporate taxpayers
The solidarity surcharge will rise from currently 5% to 7% for Luxembourg-resident entities with a collective character which are liable to corporate income tax. Accordingly, the aggregate 2013 tax rate applicable to Luxembourg corporate taxpayers established in Luxembourg-city will increase from currently 28.80% to 29.22% (i.e. 21% corporate income tax, plus 7% solidarity surcharge, plus 6.75% municipal business tax when the taxpayer is established in Luxembourg City).
5.2 Luxembourg-resident individual taxpayers
The solidarity surcharge will rise from currently 4% to 7% for Luxembourg-resident individual taxpayers and even to 9% for taxable income exceeding 150,000 euros (Tax Class 1 and 1a, singles) or 300,000 euros (Tax Class 2, spouses assessed jointly).
6. Other cuts into expenses deduction for individual taxpayers
It is intended that the annual interest deduction allowance will be reduced by 50% and be limited to 336 euros per taxpayer (672 euros in Tax Class 2).
It is further intended that the first 4 units for home-to-work lump-sum deduction travel expenses will be abolished, equalling a tax deduction of 396 euros per annum.
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.
