On 11 October 2017, Finance Minister Gramegna presented the 2018 budget to Parliament. The 2018 budget draft law includes some tax measures. An additional reform is in the pipeline, with some upcoming changes to the tax regime of stock option plans. ATOZ, Taxand Luxembourg, summarises the main tax changes to come in 2018.

 

Corporate income tax measures

Scope of investment tax credit extended to the acquisition of software

 

The draft law extends the scope of the investment tax credit (bonification pour investissement) to the acquisition of software. However, the benefit of the investment tax credit is subject to certain conditions and limitations:

  • The investment tax credit only applies if the software is acquired from a third party. Therefore, acquisitions from related parties within the meaning of article 56 Income Tax Law (ITL) are excluded
  • It is not possible to benefit both from an intellectual property regime and from the investment tax credit for the same software. Thus, if a tax payer claims the investment tax credit benefit for the acquisition of specific software, the income generated by this software will not be able to benefit from an IP regime
  • The global investment tax credit amounts to 8% for the first tranche of EUR  50,000 and 2% for the tranche exceeding EUR 150,000. However, the tax credit may not exceed 10% of the tax due for the tax year during which the operating year is ending during which the acquisition was made

Discover more: Luxembourg 2018 Budget: main tax measures

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Taxand's Take

During the presentation of the 2018 budget, a reform of the tax regime of stock-options or warrants has been announced, the aim of which would be to align the tax rate to half the global rate of income tax, as is currently the case for capital gains. It will be necessary to await the release of a draft law in this respect in order to assess the impact of the changes to be introduced to this tax regime.

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International Tax | Luxembourg

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