A tax circular letter containing framework of rules governing the functional currency regime (FRC) was issued by the Luxemburg Tax Authorities on 16 June 2014. It will apply to corporations that expresses in a currency other than Euro and maintain its financial statement in the same currency. Corporations are now allowed to establish taxable income in the currency of its corporate capital other than Euro if the currency signifies its currency of primary economic environment that means the functional currency.
The calculation of taxable income shall be entirely based on functional currency. The taxable income shall then be translated into Euro at the applying exchange rate. All tax due as well as tax assessments shall be computed and issued in Euro. Tax payments and reimbursements will be made in Euro.
