On 20 December 2023, the Luxembourg Parliament approved Law No 8292 of 22 December 2023 on pillar two global minimum tax. 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 Law introduces the Pillar 2 Income Inclusion Rule (IIR) and the Undertaxed Profit Rule (UTPR). Additionally, it includes the implementation of a Qualified Domestic Minimum Top-Up Tax (QDMTT).
The Law will generally apply to tax years starting on or after 31 December 2023. The IIR QMTT will be effective from fiscal years beginning on or after 31 December 2023. The UTPR will be effective from fiscal years beginning on or after 31 December 2024.
