On 26 April 2019, Luxembourg published the Law of 26 April 2019 in the Official Gazette containing the measures for the 2019 budget. The law lowered the standard corporation tax rate from 18% for the financial year 2018 to 17% for the financial year 2019. There are no changes to the rate of the “solidarity surtax” charged on the corporate tax rate, or to the rate of municipal business tax payable by companies. This change to the CIT rate results in a total tax rate of 24.94% for companies in Luxembourg City for FY 2019, down from 26.01% applicable for FY 2018.
In addition, the reduced CIT rate of 15% applicable since FY 2017 for companies with a tax base of less than EUR 25,000 is extended to companies with a tax base of less than EUR 175,000 for FY 2019. For companies with a tax base between EUR 175,000 and EUR 200,001, the corporate income tax charge is to be EUR 26,250 plus 31 % of the basis above EUR 175,000 for FY 2019.
According to law, the deduction of excess borrowing cost is limited to 30% of EBITDA or EUR 3 million, whichever is higher. Loans concluded before 17 June 2016 would be grandfathered. Exceeding the borrowing costs that exceed the limits may be carried forward indefinitely each year with the same limit, but may not be passed to a legal successor.
The measures generally apply from 1 January 2019.
