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Budget 2013: Likely Corporate Tax Amends

A Draft law 6497, voted on 13 December 2012 introduced some tax measures aimed at increasing the state revenues. Should these be adopted in their current form, which is very likely at this stage, they will mean additional tax costs for most taxpayers.

Taxand Luxembourg investigates the key amendments to corporate income taxation.

Introduction of minimum corporate income taxation for companies
The draft law introduces a minimum Corporate Income Tax (CIT) which varies between EUR 500 and EUR 20,000. Taking into account the solidarity surcharge of 7% as of 2013, this brings the maximum amount of minimum CIT to EUR 21,400. The minimum CIT will apply to all "non-SOPARFIs".

Minimum income taxation of SOPARFIs increased
The minimum CIT of SOPARFIs is increased from EUR 1,500 to EUR 3,000. Taking into account the solidarity surcharge, this means that the minimum taxation of SOPARFIs is increased from EUR 1,575 to EUR 3,210. As for "non-SOPARFIs", the minimum CIT is not a final tax but a tax advance creditable against any future CIT liability and which cannot be reimbursed.

Tax consolidation
The draft law amends the rules in such a way that even in case of tax consolidation, the minimum CIT due by the parent will be increased by the minimum CIT due by each of the companies included in the tax consolidation (which was not the case so far) without exceeding EUR 20,000. This may provide a measure of relief to groups including large number of companies, however the 5 year requirement for a company to be consolidated may be problematic.

Net Worth Tax ("NWT") reduction not granted up to the amount of the minimum CIT
The draft law amends the rules according to which Luxembourg tax payers can reduce, by means of the creation of a NWT reserve (?8a of the NWT law), their NWT liability by an amount of maximum the amount of CIT due. The aim of the amendment is to make sure that the minimum tax will not be compensated by a corresponding reduction of the NWT due by the companies.

Discover more: Budget 2013 - tax measures

Your Taxand contact for further queries is:
Keith O'Donnell
T. +352 26 940 257


Taxand's Take

These taxes may be a source of real concern for companies holding foreign property, a common structure in Luxembourg. The foreign real estate income of these companies is exempt from tax under Double Tax Treaties signed by Luxembourg. It is questionable whether the minimum CIT is consistent with Luxembourg DTTs in these cases.

Access Taxand Luxembourg's key tax news from 2012

Taxand's Take Author

Keith O'Donnell
Taxand Board member & Taxand global real estate tax service line leader