On 14 October 2015, the Luxembourg government submitted the bill of law 6900 relating to the 2016 budget (the “Budget Bill”) to the Luxembourg Parliament.
The two main tax measures under the Budget Bill are:
- the repeal of the Luxembourg favourable tax regime applicable to intellectual property rights provided for under (i) Article 50bis of the income tax law (“ITL”) pursuant to which revenues from and capital gains realised upon the disposal of intellectual property rights are 80% tax exempt and (ii) Article 60bis of the net wealth tax valuation law pursuant to which intellectual property rights are fully exempt from any net wealth tax (the “IP Regime”).
- the introduction of a tax amnesty for resident taxpayers who reveal non-declared income or assets between 1 January 2016 and 31 December 2017 (the “Tax Amnesty”).
1. Repeal of the IP Regime
The IP Regime will be repealed with effect from 1 July 2016 for corporate income tax and from 1 January 2017 for net wealth tax purposes.
However, the Budget Bill introduces a grandfathering period for intellectual property rights acquired or developed before 1 July 2016 during which taxpayers may continue to benefit from the IP regime until 30 June 2021 for corporate income tax purposes and 1 January 2021 (included) for net wealth tax purposes.
Notwithstanding the above, intellectual property rights acquired after 31 December 2015 from a related company (within the meaning of Article 56 ITL) will only continue to benefit from the IP Regime until 31 December 2016 for corporate income tax and 1 January 2018 (excluded) for net wealth tax purposes, unless the intellectual property rights qualified for the IP Regime or benefited from a similar foreign tax regime at the date of the acquisition.
The Luxembourg tax authorities will automatically exchange information with foreign tax authorities on the identity of taxpayers who benefit from the IP Regime in relation to intellectual property rights acquired or developed after 6 February 2015.
2. Tax Amnesty
Further to the introduction of the Tax Amnesty, the taxpayers concerned will not be subject to penalties for fraud but the amount of the avoided taxes will be increased by an amount of 10% for any filing made during the 2016 tax year and by an amount of 20% for any filing made during the 2017 tax year.