Date de publication : 06-10-1907
The following information are for the sole purpose of providing a general overview of the local taxation of the Corporate tax aspects of the country. In any case, it can not replace a tax advice, or be considered as an official information.
Yes we tax in Luxembourg
New tax reform: No specific information
New tax treaties:
- Tax treaty between Luxembourg and Norway is under revision.
- Tax treaty between Luxembourg and Ukraine is ratified by Ukraine.
- Tax treaty between Luxembourg and Uruguay enters into force.
Local tax advisors
No specific information on the local tax advisors.
The definition of Permanent Establishment follows the wording of article 5 of the OECD Model:
- Dependent agent who habitually concludes contracts in the name of a non-resident company (except is the activity is limited to purchase of goods);
- Fixed place of business, building site, construction, assembly or installation and any related supervisory activity, for a period of 6 months.
Resident companies are taxed on their worldwide income.
Entities are considered to be resident for tax purposes in Luxembourg if their legal seat is in Luxembourg, or if their place of central administration (meaning, management & control) is in Luxembourg.
Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.
Corporate Income Tax
The general CIT tax rate is 19% (reduced to 18% for 2018). Small companies (revenues less than around 25kEUR) are taxed under a 15% CIT tax rate.
Note: a 7% surcharge for the employment fund is levied on the CIT so that the effective tax rate is 27.08%
Note: in the case where assets of the company is composed for at least 90% of financial assets, there is a 3.2kEUR minimum CIT (including the surcharge).
Non-taxable income includes the following:
- Dividends received from qualifying participations
- Certain capital gains deriving from qualifying participations
- 80% of income derived from certain intellectual property rights
Non-deductible expenses includes the following:
- Dividends benefiting from the participation exemption ;
- Certain interests exceeding a debt/equity ratio;
- Fines and penalties
Carry forward: Yes indefinitely, but some restrictions may apply.
Carry back: No
Companies should submit the tax return annually before the 31 May of the following year.
Companies shall pay quarterly advance payments on 10 March, 10 June, 10 September and 10 December; and the balance must be paid within 1 month after delivery of the assessment notice.
Whithholding Taxes (payment to foreign companies)
The local tax rates in Luxembourg are the following, subject to the provisions of an applicable double tax treaty, if any.
There is no WHT on the profits paid from a branch to its foreign head office.
The general rate of WHT on dividends is 15%.
Note: in case of gross up (payment by the distributing company), the WHT on dividends is 17.65%.
The general rate of WHT on interest is 0%.
The general rate of WHT on Royalties is 0%.
The general rate of WHT on management fees is 0%.
The general rate of WHT on technical services is 0%.
Capital gains are taxed as general income under the regular CIT.
Note: cases capital gains deriving from qualifying participation are not taxable.
Standard VAT tax rate is 17%
Reduced tax rates are:
- 14% (among others, certain financial services, minerals oil,…);
- 8% (among others, gas, electricity,…)
Zero-rated supplies include, subject to certain conditions:
- exports of goods;
- intra-Community supplies of goods;
Exempt supplies include, subject to certain conditions:
- Certain financial services
- Insurance services ;
- Lease of real estate property;
Note: exempt transactions differ from zero-rated transactions in that the input VAT associated with exempt transactions is not deductible.
EU taxable companies may claim a VAT refund to their own tax authorities through on the basis of the 13th EU Directive.
Certain non-resident companies (which are not required to register and incur Luxembourg VAT in the course of their business activities in Luxembourg) may apply for a refund in the same conditions than a resident company.
No other specific information of VAT in Luxembourg.
The general statute of limitation is 5 years starting at the end of the year in which the tax return had to be filed.
The statute of limitation is extended to 10 years for negligent tax evasion.
There is no foreign exchange control in Luxembourg. Income and capital can be freely repatriated.
There are no properly thin capitalization rules in Luxembourg. However there is a 85:15 debt/equity ratio, so that interest payments on debt exceeding this ratio may be regarded as deemed distributions.
Do not hesitate to share your experience in Luxembourg with us in the comments below. Any comments are welcome !