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Luxembourg corporate income tax law
|
Taxable basis |
General |
Luxembourg city |
Corporate income tax
|
More than Eur 15'000 |
21% |
21% |
| Less than EUR 15'000 |
20% |
20% |
Commercial tax |
Above EUR 17'500 |
7,50% |
6,75% |
Unemployment surcharge |
|
4% |
4% |
Aggregate income tax rate |
|
29,34% |
28,59% |
Net wealth tax |
|
0,50% |
0,50% |
Losses may be carried forward indefinitely. Fiscal consolidation is also possible if the parent company owns at least 95 % of the subsidiary (75% with a special agreement).
Capital Gains for Corporations
These are treated as ordinary income and taxed accordingly. Participation exemption capital gains are exempt from corporate tax.
Participation exemption
Dividend income and capital gains received by Luxembourg companies from EU or non EU companies are tax exempt provided certain conditions are met, such as a detention period of 1 year in total, a minimum shareholding of 10% or Eur 6’000’000 for capital gains, some qualifying conditions at the level of the shareholding unless referred to in article 2 of the Parent-Subsidiary Directive (90/435/CEE).
Wealth Tax
The normal rates of withholding tax are 15 % on dividends (zero on dividends paid to an EC parent); 10 % on royalties; and 0% on interest. These may be reduced by Tax Treaties between the various countries. Also, a withholding tax between 20 % is levied on directors' and commissionaires fees.
Capital Registration Duty("droit d'apport")
This is charged at 1 % on incorporation based on the capital subscribed in cash or in kind. Reduction of the capital duty rate down to 0.5% will be applicable as from January 1st, 2008. It is also charged on increases in capital; where the increase is by introduction of cash the taxable base is the cash introduced; where other assets are introduced, such as shares in a company or real estate, the taxable base is the value of the assets introduced, as certified by a Réviseur
d' Entreprises. Where an increase is effected by capitalizing accumulated reserves, or as a result of a contribution-in-kind of more than 65 % of the shares of an EC registered company, no duty is payable.
Investment Tax Credit
Investment in depreciable fixed assets (including software but excluding, cars and land and buildings) carries a tax credit of 10 %, against corporate income tax. Additional credits between 2 % and 6 % are available on investments in tangible assets depreciable over a minimum of 3 years. There are "anti-abuse" provisions relating to certain types of leasing arrangements. Unused credits can be carried forward for 10 years.
Value Added Tax
Everyone carrying on an activity with a view to profit, having an annual turnover exceeding EUR 10.000 must register for VAT. This is charged at 15 %, 12 %, 6 % and 3 %, with VAT rules closely following the EC Sixth and Eighth Directive. |
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