Luxembourg Budget 2013 & Tax Package 2013 Updated
On 6 November 2012, Finance Minister Luc Frieden presented amended budget figures for the year 2013. The consolidated budget foresees a positive difference of €270 million. All in all, central deficit would be reduced from €1.3 to €1.04 billion, or 2.3% of Luxembourg's gross domestic product.
Most of the additional revenue will obviously be generated through tax-related measures, which are summarized below. These new measures will apply as of 1 January 2013 (subject to parliamentary enactment).
Introduction of a minimum tax for corporations
A minimum tax will be imposed on all corporations. The new tax will range from €500 to €20,000, depending on the balance sheet total of the company.
Minimum flat tax for Soparfis doubled
The current minimum flat tax of € 1,500 per annum for Soparfis (i.e. Luxembourg fully taxable companies for which the sum of the financial assets, securities and bank deposits exceed 90% of their total balance sheet) will be doubled, thereby increasing to €3,000 (€3,210 including the 7% solidarity surcharge).
Investment tax credits reduced
The 7% global investment tax credit granted for qualifying investments of up to €150,000 will be maintained, whereas the additional 3% granted above this amount will be reduced to 2%.
The tax credit for additional investments in qualifying assets will be reduced from 13% to 12%.
The current tax credits for investments in ecological equipment and projects will remain unchanged.
Increase in the unemployment surcharge (so-called "solidarity surcharge")
The solidarity surcharge will increase by 2 percentage points for corporate taxpayers.
For corporations liable to corporate income tax, the solidarity surcharge will rise from 5 to 7%. Accordingly, the aggregate 2013 tax rate applicable to corporations resident in the municipality of Luxembourg will increase from 28.80% to 29.22% (i.e. 22.47% corporate income tax that includes the 7% surcharge, plus 6.75% municipal business tax applicable to the municipality of Luxembourg).
For individual taxpayers, the unemployment surcharge will increase by 3 percentage points, from the current 4% to 7%. For taxable income exceeding € 150,000 in tax class 1 and 1a or € 300,000 in tax class 2, the rate will increase to 9%. Considering the amended tax grid for individuals, the marginal tax rate will rise to 42.80% (40% x 7%) and 43.60% (40% x 9%) respectively.
Tax grid for individuals
The current income tax grid for individuals is complemented with a new bracket of 40% for taxable income exceeding €100,000 (tax class 1), respectively €200,000 (tax class 2).
Taxation of stock options
The current tax regime applicable to stock option plans will be considerably limited in application as from 2013.
VAT on private dwellings
The maximum amount of refundable VAT on expenses incurred for the purchase or the construction of a private dwelling is lowered from €60,000 to € 50,000.
Special expenses: deduction for debit interest cut by 50%
The maximum annual deduction for debit interest on consumer loans is cut by 50% and will be limited to €336 per taxpayer (increased by the same amount for the spouse/partner as well as for each child living in the taxpayer's household).
Lump sum deduction for travel expenses reduced
The first 4 distance units (i.e. €396 per year) of the lump sum deduction for travel expenses between a taxpayer's home and his place of work will be abolished.
The vehicles taxation regime will be amended. Notably the bonus for diesel particulate filters (DPF) for diesel-engine vehicles will be abolished.
Increase in excise duties on tobacco and petrol
A rise in excise duties on tobacco and petrol is expected to generate additional revenue of €35 million.
For further information, please do not hesitate to contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.