Luxembourg’s Finance Minister Gilles Roth presented a Bill n° 8414 to the parliament on 17 July 2024, aiming to reduce corporate income tax (CIT) rate and implement various tax relief measures.
The proposed changes are designed to enhance the competitiveness of businesses and improve the purchasing power of households amid ongoing economic challenges.
Reduction in corporate income tax rate
A proposed reduction in the CIT rate starting from the fiscal year 2025 includes:
- A decrease from 17% to 16% for companies with taxable income exceeding EUR 200,000, resulting in a combined rate of 23.87% for those based in Luxembourg City.
- A reduction from 15% to 14% for companies with taxable income of EUR 175,000 or less, leading to a combined rate of 21.73% for Luxembourg City-based companies.
Exemptions for investment funds
The bill proposes an exemption from the annual subscription tax for actively managed UCITS ETFs, aiming to make Luxembourg a more attractive hub for investment funds.
Modernisation of the impetrate tax regime
The bill suggests a streamlined and more appealing tax regime for impetrates, providing a 50% tax exemption on annual gross compensation up to EUR 400,000. This measure is designed to attract top international talent by making Luxembourg’s tax incentives more competitive with those of other jurisdictions.
Introduction of an overtime tax credit
A new tax credit will be available for cross-border workers who perform overtime, addressing potential taxation issues arising from double taxation treaties.
Actively managed ETFs
The Bill aims to amend Articles 175 and 176 of Luxembourg’s UCI Law of 17 December 2010 to exempt actively managed UCITS ETFs from the annual subscription tax. This change is intended to enhance Luxembourg’s competitiveness in the European and international ETF UCITS markets. The tax exemption would take effect on the first day of the quarter following the law’s publication in the memorial.
Changes to the law on SPFs
The bill proposes changes to the tax regime for family wealth management companies (SPFs). While SPFs currently enjoy exemptions from corporate income tax and net wealth tax, they are subject to an annual subscription tax.
The bill aims to increase this tax from EUR 100 to EUR 1,000 and introduces clearer guidelines for debt calculations and compliance requirements, including mandatory electronic submission of compliance certificates.
Additionally, the bill enhances enforcement measures by allowing for increased penalties and the potential withdrawal of SPF status for noncompliance.
