On 13 November 2023, the Luxembourg government submitted a revised draft bill on global minimum tax to the Parliament. The bill aims to incorporate the OECD Pillar Two global minimum tax rules in line with EU Council Directive 2022/2523 of 14 December 2022.
The Directive imposes a global minimum tax rate of 15% on covered groups with annual consolidated revenue exceeding EUR 750 million in at least two of the previous four fiscal years. This minimum rate will apply in each jurisdiction in which the group operates and will be calculated on an adjusted accounting measure of profit.
The revised bill brings about modifications in the following areas:
- Implementation of the Local Accounting Standard Rule for the qualified domestic minimum top-up tax (QDMTT);
- Exclusion of QDMTT for investment entities/insurance investment entities;
- Introduction of the concept of marketable transferable tax credits;
- Incorporation of the equity gain or loss inclusion election;
- Establishment of a permanent safe harbor rule and undertaxed profit rule (UTPR) safe harbor.
The revised bill will go through the regular parliamentary process. If approved by the end of the year, it will generally apply to tax years starting on or after 31 December 2023. Provisions related to UTPR will typically apply to tax years starting on or after 31 December 2024.
