Luxembourg tax update 2017

On 29 February 2016, the Luxembourg government set out the principles of fiscal reform that should be effective from 1 January 2017. Please note that more concrete details regarding this reform and other improvements in Luxembourg income tax law may be announced shortly. We will follow these developments closely.

With respect to companies, the principal measures already announced by the government can be summarized as follows:

  • the most significant measure is an expected decrease in the rate of corporate income tax. The corporate income tax rate would decrease from the current rate of 21% to 19% in 2017, and then to 18% in 2018. This tax rate does not take into account the surcharge for the employment fund and the municipal business tax. For companies established in Luxembourg City, the aggregate tax rate should therefore be 27.08% in 2017 and 26.01% in 2018;
  • a decrease in the corporate income tax rate from 20% to 15% for companies with an annual taxable income below EUR 25,000;
  • an increase in the minimum annual net worth tax for Soparfis from EUR 3,210 to EUR 4,815; and
  • limitations on the use of tax losses carried forward realized as from 2017.

The government has also announced the repeal of a 0.24% registration fee imposed on notarial deeds documenting the transfer of debt claims.

Several measures announced by the government will impact individuals. The announced measures aim at creating a fairer tax regime, e.g. adaptation of tax rates per tranche of income, an increase in ceilings for various tax deductions and an increase to 20% in the RELIBI final withholding tax on income from savings of Luxembourg individual residents.