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Measure Name
Date when measure came into force
CIT - Rate increase - Minimum tax 2013/01/01
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Generic Tax Name Corporate income tax
Tax name in the national language Impôt sur le revenu des collectivités
Tax name in English Corporation tax
Member State LU-Luxembourg
Tax in force since 1967/12/04
If abolished, date on which the tax ceases to apply
Business version date 2015/01/01
Version date 2015/02/17
This file was last updated on

Type of tax
Direct taxes Personal income tax
Corporate income tax
Other

Indirect taxes VAT
Excise duty (EU harmonised)
Alcoholic beverages
Energy products and electricity
Manufactured tobacco
Other

Social security contribution Employers
Employees
Other
 
Legal base

Law of 4 December 1967 on income tax, Title II, Articles 158-174 (Mémorial A, 1967, pp. 1276-1281), as amended by successive laws and implementing regulations, the most recent of which are:

Law of 23 December 1997 amending income tax and other provisions (Mémorial A, 1997, p. 3332);

Law of 8 June 1999 introducing pension funds (Mémorial A, 1999, p. 1476);

Law of 8 August 2000 (Mémorial A, 2000, p. 2217);

Law of 15 December 2000 (Mémorial A, 2000, p. 2969);

Law of 21 December 2001 (Mémorial A, 2001, p. 3324);

Law of 22 March 2004 (Mémorial A, 2004, p. 720);

Law of 15 June 2004 (Mémorial A, 2004, p. 1568);

Law of 9 July 2004 (Mémorial A, 2004, p. 1878);

Law of 13 July 2005(Mémorial A, 2005, p. 1860);

Law of 17 November 2006 (Mémorial A, 2006, p. 3476).

Law of 19 December 2008 (Mémorial A, 2008, p.2627)

Law of 21 December 2012 (Mémorial A, 2012, p. 2830)

 
Who sets
The tax rate is set by




The tax base is set by




The reliefs are set by




Comments
 
Beneficiary





Comments

 
Geographical Scope Grand Duchy of Luxembourg.
 
Taxpayers
Domestic-source income of non-resident entities is Taxed
Not Taxed
Comments
 
Tax object and basis of assessment
As general rule, taxable income under corporate income tax includes also








Comments

Income considered Domestic income
Worldwide income (subject to double-tax relief)
Comments

Comments

Income.

Trading profit. The profit is defined as the difference between the net invested assets at the end and the net invested assets at the beginning of the year, plus any withdrawals but minus any additions and contributions made during the year.

(The profit is determined according to the rules governing personal income tax).

 
Deductions, Allowances, Credits, Exemptions
Valuation of inventory
System First-in first-out (FIFO)
Last-in first-out (LIFO)
Average cost
Specific identification (unit method)

Comments

Depreciation rules
 
Buildings
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Depreciation rate:

1.50 – 4.00%                                                       

Average depreciation period
Average depreciation rate
 
Movable (tangible) assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

The declining-balance depreciation rates may be as high as 3 times the straight-line depreciation rate without exceeding 30% (4 times and 40% for equipment exclusively used for research and development

Average depreciation period
Average depreciation rate 20.0 %
 
Movable fixed assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

The declining-balance depreciation rates may be as high as 3 times the straight-line depreciation rate without exceeding 30% (4 times and 40% for equipment exclusively used for research and development).

Average depreciation period
Average depreciation rate 10.0 %
 
Intangible assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments
Average depreciation period
Average depreciation rate
 
Land (if any)
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments
Average depreciation period
Average depreciation rate


Comments

Are there limits to interest deductions? Yes No
If yes:
Definition of deduction limit No deduction up to exempted income

Comments

Is there an Allowance for Corporate Equity? Yes No
If yes:
Notional rate applied for allowance

Comments

Losses
Loss carry-forward exists? Yes No
If yes:
Time limit: Indefinite
 
Size limit:
 
Loss carry-backward exists? Yes No
If yes:
Time limit: Indefinite
 
Size limit:
 

Comments


Comments

Deductions:

In addition to the deductions as for personal income tax, the other expenses which may be deducted are:

1. funds earmarked for the technical reserves of insurance companies;

2. refunds made to members by cooperative and certain agricultural associations in so far as the distributions of profits, other than the refunds, represent less than 5 % of the net assets invested at the end of the financial year concerned;

3. amounts due to partners in partnerships limited by shares for rent, interest on assets, or fees for an activity in the service of the company.

 

Exemptions:

Personal exemptions:

1. Certain corporate bodies whose direct or exclusive objectives are religious, charitable or of general interest.

2. Establishments supplying water, gas and electricity and belonging to the State, municipalities or groups of municipalities.

3. National lottery, national low-cost housing corporation, independent employers' pension and provident funds.

4. Holding companies.

5. Exclusively occupational associations and agricultural cooperatives in which machines are used in common and by which the agricultural produce of the members is processed or sold.

 

Real exemptions (privilege of parent companies and subsidiaries - Schachtelprivileg):

-   Where resident joint stock companies sell shares in a collective entity, the capital gains realised are tax exempt provided a holding period of at least 12 months and a share holding of at least 10 % or that was purchased for at least EUR 6 millions;

-   The income of a resident joint-stock company which is fully liable to tax and which has a direct continuous holding of at least 10 % or at least EUR 1,200,000 in the capital of another joint-stock company is exempted wholly if the other company is fully liable to tax.

 

Interest deduction

The Luxembourg tax law does not contain any specific thin-capitalization rules. In principle, borrowed money that is necessary for financing an operation is not limited to a percentage of paid-in capital. However, based on the abuse-of-law doctrine, the authorities tend to challenge debt-to-equity ratios of companies engaged in holding activities that are greater than 85:15. Under the abuse-of-law doctrine, the tax authorities may challenge fictitious or abnormal transactions and schemes that are entered into for the sole purpose of avoiding taxes.

 
Rate(s) Structure
Nominal corporate income tax rate Rate: 21.00 %

Central government surcharge Rate: 7.00 %
Regional government surcharge Rate:
Local government surcharge Rate: 6.75 %
Combined rate (all-in rate) Rate: 29.22 %


Comments

The combined rate is calculated as follows:

Nominal rate 21%
Central government solidarity surcharge 7%
21 x 7% = 1.47%
21 + 1.47 = 22.47%
Local government surcharge 6.75%
Combined all-in rate      22.47 + 6.75 = 29.22%

Special tax rate for SMEs
Special tax rates apply to SMEs: Yes No
If yes:
Nominal corporate income tax rate Rate:
Central government surcharge Rate:
Regional government surcharge Rate:
Local government surcharge Rate:
Combined rate (all-in rate) Rate:


Comments

Surcharges:
To provide resources for the unemployment fund, the liability for corporate income tax is increased by a “solidarity” surcharge of 7 % of the amount payable under the above rules.

 
International aspects
Treaty countries Non-treaty countries
 
Repatriated profits are taxed according to the following system Exemption system Exemption system
Tax credit Tax credit
Deduction Deduction
 
Interest received is taxed Yes No Yes No
Tax rate on interest received 29.22 % 29.22 %
Outgoing dividends withholding tax 15.00 % 15.00 %
Outgoing interest payments withholding tax 0.00 % 0.00 %
 
Foreign losses can be set-off Yes No Yes No
If yes:
Minimum direct or indirect shareholding to qualify loss-offset (if applicable)
 
Loss carry-forward exists? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Loss carry-backward exists? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Controlled foreign company (CFC-)rules exist? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Threshold for capital or voting power held directly or indirectly by resident in non-resident company
CFC-rules apply if foreign tax rate is lower than
CFC-rules apply for passive income only? Yes No Yes No

Comments   Treaty countries

Comments   Non-treaty countries
 
Measures against profit shifting
 
Do Thin Capitalization (TC) rules exist? Yes No
If yes:
Date of first introduction
Introduced as Explicit TC law
Part of CIT law
Test for TC Ratio
Arm's length
If ratio
Value of numerical ratio:
Definition numerator
Definition denominator
 
Debt considered for test Internal
Internal and external
TC depends on shareholding? Yes No
Substantial shareholding threshold 10.00 %
 
Type of shareholding Direct
Indirect
Automatic remedy Yes No
Remedy Non-deductibility of interest
Reclassification as dividend
 
Rules apply to All companies
Foreign companies
Non-EU companies
Transfer pricing rules exists? Yes No
If yes:
Arm’s length principle applied? Yes No
 
Remedy Fee
Tax base increase
 
Tax due date

Tax is payable annually on the basis of tax returns within one month after receipt of the tax assessment notice.

Tax is paid in quarterly instalments in advance and withheld at source on certain forms of income (income from capital).

The advance payments and the tax withheld at source are deductible against final income tax liability.

 
Tax collector

Administration of direct taxes (Administration des contributions directes).

 
Special features

Non-residents:

Only income accruing in Luxembourg is taxable; there are no personal exemptions; tax may be withheld at source, and this extinguishes the tax debt.

Losses:

Unlimited, subject to the same conditions as for natural persons.

 
Economic function







Comments
 
Environmental taxes



Comments
 
Tax revenue
ESA95 code d51o (d51ba + d51bb)

Year
Annual tax revenue (millions)
Currency
Tax revenue as % of GDP
Tax revenue as % of total tax revenue
2012 2,257.00 EUR 5.18
2011 2,148.00 EUR 5.09
2010 1,707.00 EUR 4.32
2009 1,490.00 EUR 4.11
2008 1,427.10 EUR 3.79
2007 1,439.00 EUR 3.91
2006 1,200.00 EUR 3.59
2005 1,292.50 EUR 4.35
2004 1,112.60 EUR 4.02
2003 1,344.70 EUR 5.20
2002 1,391.10 EUR 5.62
2001 1,180.90 EUR 5.02
2000 1,073.30 EUR 4.63

Comments