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Luxembourg on the Good Path to Fiscal Consolidation

Written by: Bridgewest

During the last meeting, Luxembourg and International Monetary Fund (IMF) representatives have discussed the tax changes that would be enabled in 2017, after the IMF commended the Grand Duchy for its economic results obtained in 2015. Our lawyers in Luxembourg can offer more information on the proposed tax changes.

Luxembourg had a 1% surplus to the Gross Domestic Product in 2015

During their first meeting this year, Luxembourg and IMF representatives have discussed the economic performance registered by the small country last year. The IMF offered Luxembourg as an example of fiscal prudence considering the Grand Duchy managed to rise its GDP by 1% in 2015 and also achieved to have better financial results than predicted. The IMF also commended Luxembourg for increasing its tax transparency, and thus gaining investors’ and other partner countries’ confidence. At the end, the IMF also welcomed the Government’s efforts to divert its economy away from the financial sector in order to enhance and make it more resilient.

In 2015, Luxembourg raised the value added tax by 2%, managing to shift the tax burden from income to consumption. However, this measure will not be the only one implemented, Luxembourg proposing a reduction of the corporate tax starting next year.

New tax changes in Luxembourg, starting 2017

During the meeting with the IMF, Luxembourg also released its plans for changing the tax system starting 2017. The new taxation rules to be implemented show that Luxembourg wants to remain an attractive business destination. The following changes would be set in place to companies in Luxembourg:

  • -          the corporate tax rate would be reduced progressively from 21% to 19% in 2017 to 18% in 2018;
  • -          the minimum wealth tax to be paid by SOPARFIs would be 4,815 euros starting 2017;
  • -          innovative companies would be taxed at a rate of 15%, as long as their yearly taxable income remains below the threshold of 25,000 euros.

Also, the registration duty for the transfer of debts which is now set at 0.24% will be repealed.

With respect to individuals, the 0.5% budgetary compensation tax would be repealed, while single parents will benefit from other fiscal incentives as well.

If you want to open a company in the Grand Duchy and need assistance, do not hesitate to contact our law firm in Luxembourg.