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Luxembourg – New tax measures for
2013 – Clarification in relation to the
minimum corporate income tax
On 13 December 2012, the Luxembourg Parliament enacted bill n°6497 (the
“Tax Bill”), introducing new tax measures for corporations and individuals
that are effective as from tax year 2013. Please refer to our NewsAlert dated
17 December 2012 for further details in this respect.
Further to the numerous discussions held between the Government and
various stakeholders since the introduction of the draft tax bill, on
21 December the tax authorities issued further guidance as to how the
provisions in relation to the minimum corporate income tax are to be
interpreted, with a positive outcome for real estate owning companies.
27 December 2012
PwC welcomes this guidance, which re-affirms the willingness of the
Luxembourg Government to remain business-friendly despite the current
difficult economic environment in Europe, including in Luxembourg.
As a reminder, two different minimum corporate income taxes will apply as from tax
year 2013 as follows:

A minimum corporate income tax of EUR 3,000 (i.e., EUR 3,210 taking into
account the solidarity surtax) applicable to all corporate entities having their
statutory seat or central administration in Luxembourg, and for which the sum
of fixed financial assets, transferable securities and cash at bank exceeds 90%
of their total assets; and

A new minimum corporate income tax, ranging from EUR 500 to EUR 20,000
(increased by the solidarity surtax) depending on a company’s total assets,
applicable to all other corporations having their statutory seat or central
administration in Luxembourg, as follows:
Total assets*
Minimum tax **
Up to EUR 350,000
EUR 535
From EUR 350,001 to EUR 2,000,0000
EUR 1,605
From EUR 2,000,001 to EUR 10,000,000
EUR 5,350
From EUR 10,000,001 to EUR 15,000,000
EUR 10,700
From EUR 15,000,001 to EUR 20,000,000
EUR 16,050
As from EUR 20,000,001
EUR 21,400
* Total assets of the company as at the end of the fiscal year
**Including solidarity surtax

To avoid breaches of EU Directives or tax treaties, and following an
amendment proposed by the Luxembourg Council of State, the Tax Bill already
provided that the minimum corporate income tax is to be considered as an
advance tax payment of any present or future corporate income tax that will be
due by the corporation. As an exception to article 154 of the Luxembourg
income tax law, this minimum corporate income tax will not be reimbursed to
the taxpayer.

The question of the compatibility of this minimum tax with double tax treaties
however remained open insofar as it concerned taxpayers only deriving
income which is excluded from the Luxembourg taxable basis due to the
allocation of taxation rights to the other Contracting State.

The debate is now closed as the tax authorities have issued an official
commentary (see their Newsletter dated 21 December 2012), in which they
have confirmed that the net value of assets whose taxation rights are
exclusively allocated to the other Contracting State of a double tax treaty
entered into by Luxembourg is not to be taken into account when determining
the total assets of the company.

This means notably that companies whose principal asset is a real estate
property located in a double tax treaty country should not be subject to the
EUR 21,400 minimum tax (assuming the value of the property exceeds EUR
20 million) but to a lower amount, as the value of their other assets should be
quite nominal.

This official interpretation is warmly welcomed both by the marketplace and
by practitioners, who, since the release of the draft bill in November, have
expressed major concerns about both the potential incompatibility of the new
provisions with double tax treaties and their major impact on the competitivity
of the Luxembourg marketplace. The publication of an official interpretation,
so shortly after the vote on the law, is therefore a positive sign that the
Government and the tax authorities remain open to responding to comments
expressed by stakeholders.
For more information, please contact your local PwC tax service provider or one of the
contacts below:
…………………………………………………………………………………………………………………….
Wim Piot
Partner
+352 49 48 48 5773
wim.piot@lu.pwc.com
Fabien Hautier
Partner
+352 49 48 48 3178
fabien.hautier@lu.pwc.com
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