In Luxembourg, “fully taxable” companies (i.e., corporations whose activities are not subject to license requirements) are subject to a minimum corporate income tax of €1,575 for 2011 and 2012—provided that their total balance sheet is composed of 90% or more of financial assets, transferable securities, cash on deposit, and bank accounts.
The Luxembourg tax authorities previously took the position that real estate property generating Luxembourg income “tax free” (e.g., real estate located in treaty-partner countries) was not to be considered for purposes of computing the 90% threshold.
As a result, if the sole remaining assets were cash or cash equivalents, the Luxembourg companies holding real estate assets in a treaty-partner country were likely subject to the minimum corporate income tax of €1,575.
The Luxembourg tax authorities revised their position and have confirmed that real estate / real property will be considered for purposes of determining the 90% threshold.
Because real estate is not cash or transferable securities, Luxembourg companies whose principal assets are real estate that is directly held by them would not be subject to the minimum corporate income tax of €1,575.
Read a Summer 2012 report [PDF 1.4 MB], prepared by the KPMG member firm in Luxembourg: Real Estate & Infrastructure