Luxembourg remains attractive for the Real Estate Business
On 21 December, the Luxembourg tax authorities issued further guidance on the computation of the minimum taxation applicable to corporate taxpayers, as foreseen in the 2013 Tax Package approved by the Luxembourg Parliament on 13 December.
As a reminder, 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 a non refundable 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 (EUR 1,575 including the 5% solidarity surcharge) 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 350,000, to EUR 20,000 (EUR 21,400 including the 7% solidarity surcharge) for a balance sheet total exceeding EUR 20,000,000.
The newsletter issued on 21 December by the Luxembourg tax authorities confirms that for the computation of the minimum tax basis both for Soparfis and for other corporate taxpayers, the net book value of the assets whose exclusive taxation right belongs to a country with which Luxembourg has a double tax treaty (and not to Luxembourg) will be excluded from the calculation of the total balance sheet.
As a result where a Luxembourg company holds real estate assets in a tax treaty country which has exclusive taxation right over these assets, the net book value of such properties will be excluded from the total balance sheet to determine the applicable minimum tax.
If the Luxembourg property owning company has aggregate financial assets, securities and bank deposits exceeding 90% of their balance sheet when the real estate property in the treaty country has been excluded, the EUR 3,210 annual minimum tax should be applicable.
Similarly, assets held through a permanent establishment in a treaty country will be excluded from the total balance sheet to determine the applicable minimum tax.
Please click here to access the newsletter from the Luxembourg tax authorities.
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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.