Global

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  • Service: Tax, Mergers & Acquisitions, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 8/7/2013

Luxembourg - Guidance for determining minimum corporate income tax 

August 7: Luxembourg tax authorities issued an August 2013 circular to address certain issues concerning the minimum corporate income tax.

Background

All Luxembourg tax resident companies are subject to a minimum corporate income tax.


  • If the company qualifies as “holding company,” the minimum corporate income tax is €3,210 (including the 7% solidarity surcharge).
  • The minimum corporate income tax for all other corporations (including the 7% solidarity surcharge) is based on the company’s balance sheet total, with the amount of the minimum corporate income tax ranging between €535 (when the balance sheet total is an amount up to €350,000) and €21,400 (when the balance sheet total is greater than €20 million).

Tax authorities’ guidance

Luxembourg tax authorities on 1 August 2013 issued guidance—Circulaire L.I.R. – n° 174/1 [PDF 208 KB]—to resolve open issues under the minimum corporate income tax for 2011/2012 and for 2013.


Among the items addressed in the circular are the following provisions:


  • Luxembourg permanent establishments are not subject to the minimum corporate income tax for 2013.
  • Companies that are exempt from corporate income tax are also exempt from the minimum corporate income tax.
  • Interests in partnerships are considered to be “financial fixed assets” for purposes of the minimum corporate income tax.
  • If a company is incorporated or dissolved during a fiscal year, the entire amount of the minimum corporate income tax for the year is due; there is no pro-rata approach to this liability.
  • A fiscal year cannot exceed 12 months.
  • When a company is involved in a merger or demerger, the balance sheet total of the merged or “disappearing” company as of the date of the merger or demerger provides the basis for determining the minimum corporate income tax liability.
  • If a company transfers its place of effective management out of Luxembourg, the balance sheet total as of the date of the transfer is used to determine the minimum corporate income tax liability.
  • For 2011/2012, real estate properties and assets allocated to a permanent establishment in treaty-partner country are considered in the balance sheet total for the minimum corporate income tax determination.
  • For 2013, the book values of assets that generate (or may generate) income and for which exclusive taxation right belongs to a treaty-partner country are excluded from the company’s balance sheet total.
  • Tax credits continue to apply, but cannot decrease the corporate income tax liability below the amount of the minimum tax (with the solidarity charge included).
  • A company’s tax loss carryforwards are not affected by the minimum corporate income tax.
  • For “fiscal unity” taxpayers, the criteria for the minimum corporate income tax for 2011/2012 are determined at the level of the integrating company or the Luxembourg permanent establishment.

Read an August 2013 report [PDF 103 KB] prepared by the KPMG member firm in Luxembourg: Circular on minimum corporate income tax released




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