The government of Luxembourg released an outline of the proposals on 29 February 2016 for tax reform in 2017.
The gradual introduction of the Organisation for Economic Co-operation and Development recommendations made in the framework of the Base Erosion and Profit Shifting project (the BEPS plan) and supported by the proposed European Union Anti-Tax Avoidance Directivewill inevitably lead to a broadening of the tax base and thus to an increase of the amount of taxes to be paid by corporations. To counter this, the most significant measure for corporate taxpayers, is an expected decrease of the rate of corporate income tax. The corporate income tax rate would phase-down from the current rate of 21% to 19% in 2017, and then to 18% in 2018. For companies in Luxembourg City, this rate reduction would provide for a “global” tax rate of 27.08% in 2017 and 26.01% in 2018.
Moreover, the corporate income tax rate would decrease from 20% to 15% for corporations with a taxable basis up to €25,000 (to provide tax benefits for start-ups and small enterprises).
Other tax reform proposals include measures that would:
- Increase the minimum net wealth tax for holding companies from €3,210 to €4,815
- Introduce certain limits on the ability to carry forward tax losses
- Repeal a 0.24% registration fee imposed on notarial deeds documenting the transfer of debt claims
- Enhance efforts to address tax fraud
- Allow for a roll-over of capital gains on real estate assets held by family enterprises
- Increase allowances for new investments made by agricultural holders
