Luxembourg

Tax rates 2012 Luxembourg

Corporate tax

Rate

The corporate tax rate of Luxembourg is 21 % for all companies with a taxable income that exceeds EUR 15.000. For companies with a taxable income below EUR 15.000 the tax rate is 20 %. Also, a municipal business tax may be levied. The municipal business tax may vary between 6 % and 12 % depending on the location of business.

A net worth tax of 0,5 % on company net asset value is imposed on taxpayers subject to corporate income tax. Exemptions to this tax are available if certain circumstances are met.

Corporate income tax is increased by a 5 % surtax to the unemployment fund.

Taxation of dividends

Dividends received by a resident company are included in taxable income. The exception is if the participation exemption regime applies.

A 15 % witholding tax applies to dividends that are distributed by a Luxembourg company. The exception is if the participation exemption regime or a specific tax treaty applies.

Capital gains

Capital gains are included in taxable income and taxed accordingly. In some cases, capital gains arising from the sale of stocks are exempt from corporate income tax.

Losses

Losses can be carried forward indefinitely. Capital losses are not allowed to be carried backwards.

Withholding tax

Dividend payouts to a nonresident company are subject to a 15 % witholding tax, unless there is a tax treaty in place ofsetting or reducing the tax. Commpanies qualifying under the EU parent-subsidiary directive are exempt from witholding tax. This applies for companies residing outside of the EU as well providing the principles of the parent-subsidiary directive are met.

There is no witholding tax on interest.

There is no witholding tax on royalties.

There is no witholding tax on technical service fees.

 

Individual  tax

General

Residents of Luxembourg are subject to tax on their world-wide income. Nonresidents are taxed on Luxembourg-source income solely. To be considered resident in Luxembourg the individual must either be domiciled there or have their customary place of abode there.

Taxable income

Income is divided into different categories such as employment income, income from self-employment and agriculture and business income. Losses from one category may be used to offset profits from other categories. Investment incomes, such as dividend, is subject to 15 % witholding tax.

Rates

Progressive rates apply for income taxes. The maximum income tax is 39 %. Besides income tax a contribution to the employment fund is extracted. The individual pays 4 % for income under EUR 150.000 and 6 % above that amount.

Capital Gains

Individual capital gains are categorized into short-term and long-term. Short-term capital gains are taxed as income, progressively up to a maximum of 39 %.

Long-term gains are generally taxed at reduced rates. An exemption of EUR 50.000 is available for long-term gains realized in an 11-year period. The amount exceeding the EUR 50.000 threshold is only taxed at 50 % of the taxpayers global rate. Properties held longer than 2 years are considered long-term, hence the same rules apply.

Shares that are held longer than 6 months are considered long-term and are taxable only if the shareholding amounts to more than 10 %. Gains on other movable assets are tax exempt if the holding period is longer than 6 months.

Gains coming from the sale of an individual´s private residency are tax exempt.

Deductions

Individuals may deduct for certain expenses such as insurance premiums, pensions schemes, accident and sickness policies, childcare and housekeeping, interest on mortgagae loans and personal loans, and home saving.

Allowances exist for employment income, pensions income and dividend and interest income.

Real Estate

A land tax of 0,7 % to 1 % is imposed by municipalities in Luxembourg. The tax includes industrial plants and varies based on the type of real estate as well as location.

Net Worth Tax

There exist no net worth tax in Luxembourg.

Inheritance Tax

Inheritance tax ranges from 0 % to 48 %, providing the deceased was resident in Luxembourg at time of death. The tax base is the net market value of the estate at the time of death.

Social Security

The employer makes social security contributions of between 12,68 % and 14,69 % on behalf of its employees. Social security contributions (applying to wages and salaries) of between 12,2 % and 13,45 % are witheld by the employer.

VAT

VAT applies to all sales of goods and services. The standard VAT rate is 15 %. Reduced rates of 3 %, 6 %, and 12 % apply for certain goods and services. Exemptions include specific financial, health services and leasing of immovable property.

 

Other

Tax year. Calendar year for individuals. Corporations may choose an accounting year instead of the calendar year.

Tax treaties. Luxembourg has 64 tax treaties.

Filing requirements. Annual VAT returns must be filed and in some cases mothly or quarterly VAT filings may be required.

Tax returns are due by 31 Marh the year following the tax year for individuals.

Registration (for VAT purpose). The minimum registration threshold is EUR 10.000.

 

Links

Tax authorities. Administration of Direct Contributions

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)