Tax in Focus
Future Tax Reform in Luxembourg
Marc Schmitz is Partner in the International Tax Services department and Tax Policy Leader. He has over twenty-two years of experience in advising large industrial and commercial multinational clients on tax issues relating to international corporate structuring and financing, acquisitions, re-organizations and company migrations
Marc Schmitz Tax Practice Leader
Tel: +352 42 124 7352 Marc Schmitz & John Hames
Marc Schmitz is Partner in the International Tax Services department and Tax Policy Leader. He has over twenty-two years of experience in advising large industrial and commercial multinational clients on tax issues relating to international corporate structuring and financing, acquisitions, re-organizations and company migrations. John Hames, Partner in the Business Tax Services department, has over twenty-two years of experience in Luxembourg business taxation, with prime focus on corporate tax compliance & reporting for multinational groups.
What more can you tell us about the EY Tax practice?
John Hames, Partner in the Business Tax Services department, has over twenty-two years of experience in Luxembourg business taxation, with prime focus on corporate tax compliance & reporting for multinational groups.
John Hames Business Tax Leader
Tel: +352 42 124 7265
EY runs one of the world’s most globally coordinated Tax practices, with a network of 28,000 professionals in more than 120 countries dedicated to setting their standard for exceptional client service. Our EY Tax practice is organized across geographic areas and business lines to deliver services seamlessly to our clients. Our people and global resources are able to help clients develop and execute business strategies quickly and effectively, with strong accountability and governance.
What characterises taxation in Luxembourg at present?
Luxembourg is characterized by a stable and competitive tax system. Although the nominal tax rate may appear high compared to other countries, expenses are generally deductible if directly linked to the business, lowering thus considerably the effective tax burden. Dividends and capital gains may benefit from a tax exemption under the so-called participation exemption regime, and research and development is strongly encouraged through tax incentives (80% tax exemption of income from intellectual property, accelerated depreciation on qualifying assets). Luxembourg has furthermore a strong and continuously expanding network of double taxation treaties.
What taxation reforms has Prime Minister Xavier Bettel put forward and to what end?
Announced action points are the extension of the current corporate
32
www.finance-monthly.com
governance and substance rules, the elaboration of a comprehensive transfer pricing legislation in line with international standards and the development of a uniform procedure for advance tax clearances. The participation exemption and the tax rules applicable to intellectual property will be amended and a tax and legal framework for treasury activities (“cash- pooling”) will be introduced. The legal and regulatory framework of investment funds will further be improved and a program will be launched to attract the largest Private Equity funds to Luxembourg. Small- and medium-sized enterprises will also be encouraged via specific mechanisms to achieve sustainable economic development and growth. The government has however also announced a reinforcement of tax collection through a more systematic application of the penalties and fines already foreseen in the current legislation. Finally, VAT standard rate shall be increased (from 15% to presumably 17%) in order to compensate the VAT loss deriving from e-commerce.
If enacted, what key impacts would these have on companies and investors operating in Luxembourg?
It is expected that these measures, fully in line with the OECD and EU principles of taxation, will strengthen the position of Luxembourg in an international context. They should enable Luxembourg to continue to develop itself as prime location and center of excellence for headquarters of multinationals, attracting new businesses and corporate headquarters with adequate material and operational
presence of companies and highly skilled workers.
How can companies and investors best prepare themselves for tax reform?
The announced measures express a positive trend and the willingness of the new government to increase the attractiveness of Luxembourg in an international context. As such, companies and investors can face the tax reform with confidence, since the provisions to be introduced or to further develop areas such as e.g. corporate governance, substance and transfer pricing are for most of them a process of legislating principles they have already effectively applied in the past. Companies and investors should however be prepared to a stricter monitoring of filing and payments deadlines, and consequently take appropriate measures to be able to meet them.
Is there anything else you would like to add?
The new government has reconfirmed Luxembourg’s commitment towards the internationally agreed tax transparency standards and the introduction of automatic exchange of information on interest payments within the EU for the fiscal year 2015. The government will also continue participating in the work on the OECD Base Erosion and Profit Shifting project (BEPS) as well as European projects such as the Code of Conduct, which may involve changes in the fiscal legislation.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74