Luxembourg Tax Package 2013
On 13 December, the Luxembourg Parliament approved both the Budget (bill 6500) and the Tax Package (bill 6497) for 2013.
Finance Minister Luc Frieden had presented amended budget figures on 6 November 2012. The consolidated budget foresees a positive difference of EUR 270 million. All in all, central deficit would be reduced from EUR1.3 to EUR1.04 billion, or 2.3% of Luxembourg's gross domestic product.
Most of the additional revenue will be generated through tax measures as stated in bill 6497, which are basically summarized below. These new measures will apply as of 1 January 2013.
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 be increased by 3 percentage points, from the current 4% to 7% for the income inferior to EUR 150,000 in tax class 1 and 1a (or EUR 300,000 for tax class 2). For taxable income exceeding EUR 150,000 in tax class 1 and 1a or EUR 300,000 in tax class 2, the rate will increase from 6% to 9%.
The current income tax grid for individuals is complemented with a new bracket of 40% for taxable income exceeding EUR 100,000. Considering the amended tax grid for individuals, the marginal tax rate will rise to 43.60% (40% x 9%).
A minimum taxation will be imposed on all corporations that have their statutory seat or effective place of management in Luxembourg. That minimum taxation is no longer a final tax but an advance tax payment on the corporate tax due in the future. It will not be reduced by certain tax credits such as the investment tax credit.
- The current minimum flat tax of EUR 1,500 per annum for Soparfis (i.e. corporations that have their statutory seat or effective place of management in Luxembourg and that have aggregate financial assets, securities and bank deposits exceeding 90% of their balance sheet total) will be doubled, thereby increasing to EUR 3,000 (EUR 3,210 including the 7% solidarity surcharge).
Interests in partnerships are considered included in the 90% threshold.
- As from 2013 corporate taxpayers other than Soparfis that have their statutory seat or effective place of management in Luxembourg are subject to a minimum taxation which is determined on the basis of the balance sheet total of the tax year concerned. The minimum taxation will range from EUR 500 (EUR 535 including the 7% solidarity surcharge) for a balance sheet total inferior to EUR 35,000, to EUR 20,000 (EUR 21,400 including the 7% solidarity surcharge) for a balance sheet total exceeding EUR 20,000,000. Here after the brackets and amounts of minimum taxation (including the 7% solidarity surcharge).
||2 000 000
|2 000 001
||10 000 000
|10 000 001
||15 000 000
|15 000 0001
||20 000 000
|20 000 001
- Currently the minimum taxation only concerns the parent company or the Luxembourg permanent establishment heading the tax unity. From 2013 all subsidiaries in the tax unity will be subject to the minimum taxation however, the total amount of minimum taxation cannot exceed EUR 21,400 (including the 7% solidarity surcharge).
- The approved wording of the bill states that the minimum tax is to be handled like an advance tax payment. This is to accommodate the concerns raised by the State Council on the compatibility of a final tax with international and European law in specific cases. Contrary to standard advance tax payments, the minimum tax "will not be refunded". Whether this means that the minimum tax is not refundable at all, and, assuming it is refundable, in which circumstances, remains to be determined by jurisprudence.
The 7% global investment tax credit granted for qualifying investments of up to EUR 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%.
Currently a net worth tax credit is granted in case a reserve equaling five times the amount net worth tax is created and maintained for five years. The amount of net worth tax creditable may not exceed the amount of corporate tax including solidarity surcharge but before the deduction of corporate tax credits.
The preparatory works of the bill n°6497 indicate that the current tax regime applicable to stock option plans will be considerably amended as from 2013. The approved wording itself does however not provide for any measures in this respect.
The maximum annual deduction for debit interest on consumer loans is cut by 50% and will be limited to EUR 336 per taxpayer (increased by the same amount for the spouse/partner as well as for each child living in the taxpayer's household).
The first 4 distance units (i.e. EUR 396 per year) of the lump sum deduction for travel expenses between a taxpayer's home and his place of work will be abolished. Moreover the lump sum deduction will be capped at EUR 2,574 which corresponds to 30 distance units.
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.