The Government announced the key elements of its 2017 tax reform. This Newsflash is limited to those measures which concern companies. We will return to the other measures once the details of all these proposals are known. It should also be noted that these measures have yet to be submitted to Parliament for discussion and may therefore be subject to changes.
Key measures proposed:
1) Reduction in the corporate income tax rate
The Government has announced a progressive reduction in the corporate income tax rate (IRC) from its current level of 21% down to 19% in 2017 and to 18% in 2018. The cumulative corporate tax rate – taking into account the municipal business tax (impôt commercial communal (ICC)) and the contribution to the Employment Fund – will therefore be reduced from its current level of 29.22% to 27.08% in 2017 and to 26.01% in 2018 (Luxembourg City rate).
To support small businesses, particularly innovative businesses, the IRC is reduced to 15% for companies whose annual taxable income does not exceed EUR 25,000. The cumulative tax rate will increase to 22.80% in 2017 for these companies (Luxembourg City rate).
2) Minimum tax for Soparfis
As from 2017, the minimum tax for Soparfis (i.e., fully taxable holding and finance companies) will be increased from EUR 3,210 to EUR 4,815.
3) Limitation of tax losses
As of 2017 the deferral of new fiscal losses will be limited to 10 years and to 80% of a company’s taxable income.
4) Family businesses and farms
Measures will be taken to facilitate the handing down of family businesses to the next generation. The Government has stated that capital gains pertaining to any potential real estate or land belonging to the divested business may be exempted if transmitted to the next generation of a same family. For farmers, it is planned to increase the allowance for new investments from EUR 150,000 to EUR 250,000. on which a company is operating.
5) Registration duties
It has been announced that the 0.24% registration duty associated with deeds enclosing the assignment of receivables will be scrapped.