Key measures
Lower corporate income tax rates
The standard corporate income tax rate would decrease from 16% to 15%, while the reduced rate would decrease from 14% to 13%.
The 13% rate would apply to taxable income not exceeding EUR 200,000, an intermediate formula would cover the taxable income from EUR 200,000 to EUR 250,000. A corporate taxpayers whose profits exceed EUR 250,000 will be subject to the 15% rate.
For companies established in Luxembourg City, the maximum combined nominal tax rate would decrease from 23.87% to 22.80%.
Enhanced investment tax credit
For qualifying digital-transformation and ecological or energy-transition projects, the relevant investment tax credit rate would increase from 6% to 9%. Together with the 12% global investment tax credit, this may result in a combined credit of up to 21%, compared with 18% under the current rules.
Unlimited period for tax loss carry forward
The current 17-year limitation on the carryforward of tax losses generated from tax year 2017 onwards would be abolished for income tax and municipal business tax purposes. The other conditions governing the availability and use of tax losses would continue to apply.
Extendeholding period for certain capital gains
The holding period used to determine whether gains on movable assets held as part of an individual’s private wealth are speculative would increase from six to twelve months. Therefore, a sale of a movable asset outside this period (unless in the context of a sale of shares forming part of a substantial shareholding) should be exempt from personal income tax.
The extension may affect the taxation of certain gains realized by individuals, including under the carried-interest regime. It may also be relevant for non-resident taxpayers disposing of substantial participations where Luxembourg retains taxing rights.
Substantial shareholdings disposal would also be impacted, modifying the 6 months retaining period to 12 months. The resulting gains would generally benefit from the half-global tax rate. Therefore, a sale of shares forming part of a substantial shareholding remains taxable at half of the applicable marginal tax rate when sold outside 12 months (currently 6 months).
Investors contemplating a disposal should therefore review the timing of any transaction carefully.
Recap
|
Measure |
Current regime |
Proposed regime |
|
Standard corporate income tax rate |
16% |
15% |
|
Reduced corporate income tax rate |
14% |
13% |
|
Combined investment tax credit |
Up to 18% |
Up to 21% |
|
Relevant holding period |
6 months |
12 months |
|
Tax-loss carryforward |
17 years |
Unlimited |
Other noteworthy measures
The bill also contains several additional measures, including:
- a new accelerated depreciation regime for certain rental housing investments;
- administrative simplifications relating to the profit-sharing bonus and impatriate regimes; and
- an adjustment of the personal income tax brackets through an additional index tranche and amendments to tax class 1a
The proposed measures remain subject to the legislative process and may be amended before adoption.
If you would like to discuss their potential impact on your business, investments or Luxembourg structure, please contact your usual Tiberghien adviser or any of the authors of this publication.
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