On 14 October 2020, Luxembourg’s Finance Minister has presented the draft budget law 2020 to the Parliament. There are no measures regarding major tax reform or an increase in the tax rate in the draft budget law. The draft budget laws contain a new tax on income from Luxembourg real estate and changes to employee incentive plans, and also addresses the impact of the COVID-19 pandemic and support a sustainable recovery. The draft budget law sets out the following main tax measures:
- Specialized investment funds (SIFs) holding real estate assets will be taxed at a 20% rate on their direct and indirect revenue;
- Aggregate transfer tax on the contribution of real estate company would increase to 3.4% from 1.1% and to 4.6% from 1.4% (for real estate in Luxembourg City). This will effective from 1 January 2021;
- Luxembourg private wealth management company (SPF, société de gestion de patrimoine familial) would no longer be allowed to hold real estate through partnerships or an FCP. This will effective from 1 July 2021;
- The accelerated amortization rate on new buildings would be decreased from 6% to 4%, as well as the reduction period decreased from 6 to 5 years (after the achievement of the building). This will effective from 1 January 2021;
- The draft budget bill also covers measures regarding individual tax and indirect tax.
The draft budget law is currently in the process of parliamentary approval and would enter into force from 1 January 2021 after discussion and vote in a parliamentary session.
