Tax in Focus
Future Tax Reform in Luxembourg
Samantha Merle - Head of the Knowledge Department
Samantha Merle began working in Luxembourg in the tax department of Arthur Andersen in 1998 and subsequently Ernst & Young in 2002 where she had been intensively involved in international tax projects focusing on the financial & private equity sector. Since 2005, Samantha has been working as the Head of the Knowledge Department of Atoz. She is also a member of the core knowledge leader team of Taxand and responsible for the European Taxand trainings at the level of the Taxand Training Committee. Samantha holds a Bachelor degree in German and French Business Law and a LLM from the Universities of Paris - Sorbonne (France) and Cologne (Germany). She specialised in French business and tax law at the University of Lyon (France) and hold a Master (DESS) and DJCE in French Business and Tax Law.
Samantha Merle
E:
samantha.merle@
atoz.lu Tel: +352 26 940 235 Web:
www.atoz.lu Web:
www.taxand.com
“While the new Luxembourg Government has released an ambitious programme with a lot of positive tax measures, which reflect a clear aim to make sure that Luxembourg remains attractive, investors should keep in mind the current international tax context and more especially the on-going work aiming at fighting against base erosion and profit shifting”
In December 2013, the new Luxembourg Government released its programme, which includes positive tax measures and, more generally, contains encouraging messages for Luxembourg as a competitive location for business. Even if these are only announcements that will have to pass through the legislative process, many of the measures reflect a strong willingness of the Government to make sure that Luxembourg remains a competitive jurisdiction within and outside the EU. The Government wants to make sure that Luxembourg will keep on attracting new investments and will take the necessary steps to motivate existing investors to keep Luxembourg as their jurisdiction of choice in the future.
Luxembourg has over the last years run deficits and incurred government debt, although both at very modest levels by international standards. In order to restore budgetary stability, the Government will prioritise cost reduction and growth, instead of increasing tax rates. In addition, compliance deadlines will be tightened and self-assessment will
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be introduced in order to accelerate collection of taxes.
Tax policy will be guided by the objective of creating confidence in a stable, predictable system. The main tax the Government intends to increase is VAT, where the rate will, as expected, be increased to compensate the future loss in VAT revenues in the E-commerce sector. Indeed and as from January 1st, 2015, service providers established outside the EU having located their European headquarters in Luxembourg will no longer be entitled to charge Luxembourg VAT with respect to the E-services invoiced to EU customers (B2C). As of this date, the VAT rate applicable to these transactions will be the VAT rate applicable in the country where the customer is located. Although the new VAT rates as well as the timing of the rise are still discussed, the Government has committed to make sure that the Luxembourg VAT rate will remain the lowest in the EU (likely increase from 15 % to 17 % for the standard VAT rate).
The Government announced it will seek to attract headquarters of
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international groups, upgrading the intellectual property tax system, the parent subsidiary exemption regime, transfer pricing and substance rules, while making sure that Luxembourg is in line with all EU and OECD standards. A regime of notional interest deduction is also considered as a possible tool to stimulate businesses to increase their equity funding.
The main tax the Government intends to increase is VAT, where the rate will, as expected, be increased to compensate the future loss in VAT revenues in the E-commerce sector.
The Government intends also to make sure that the Luxembourg legal and tax system in place is improved in such a way that it is in line with the needs and expectations of the market place and investors. 2 measures illustrate this: the Government announced that Luxembourg will
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