The Luxembourg administration for direct taxes published Circular on 19 November 2015 regarding the reduction of the net worth tax. In order to obtain the tax reduction, a company must allocate a portion of its profits of a tax year to a reserve specifically formed for this purpose and request the application of the reduction for net worth tax in its tax return annexes for the tax year.

The reserve must be maintained for at least five consecutive years. The reserve has to be included at the latest in the closing commercial balance sheet of the accounting period following the year in which the allocation took place. The net worth tax due each year may be reduced by an amount equal to one fifth of the reserve formed.

If during a certain year the commercial profits are insufficient for building up a reserve of five times the reduction of NWT claimed, the amount of reserves accumulated in previous years may be put into a special reserve related to the NWT reduction if the company does not dispose of the reserve during one of the five subsequent years. After this period, the company may freely dispose of the reserve and eventually decide to distribute it to its shareholders. In the case of a group of companies, each group company can claim a reduction of the NWT, but the reduction may not exceed the amount of CIT plus surcharge due by the group in the preceding year.

The amount of the reduction claimed by all group companies may, however, not be equal to the amount of the alternative minimum CIT plus surcharge due by all group companies. If the reserve of a group company is reduced, the net worth tax due by that company in the subsequent year will be reduced by one fifth of the reduction.