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Increase in minimum annual tax burden in Luxembourg

Contributed by Fiducenter (Cyprus) Ltd
30 November, 2012

Contributed by Fiducenter (Cyprus) Ltd [www.fiducenter.com.cy]


In the second week of November the Minister of Finance of Luxembourg submitted a revised budget to the Parliament for voting, in an effort to increase the revenues of the state and constrain public spending. One of those measures provides for an increase of the minimum flat income tax levied on entities subject to Corporate Income Tax, the financial assets (including transferable securities, receivables, and bank deposits) of which exceed 90% of their total assets. Furthermore a progressive flat tax is to be introduced for any collective entities subject to Corporate Income Tax other than those detailed above.


It is reminded that the first austerity package was implemented in Luxembourg in January 2011. That package had an impact on corporate entities in Luxembourg, providing for an increase in the Solidarity Surcharge from 4 % to 5 %, increasing the total effective tax rate from 28.59% to 28.80 %, as well as in some circumstances for the introduction of a minimum flat tax of EUR1500 per annum.

The 2013 Budget follows the same approach and provides for an increase in the Solidarity Surcharge from 5 to 7% as well as for an increase in the minimum flat tax applicable to all collective entities, known as “organismes à caractère collectif”, subject to Corporate Income Tax from EUR1,500 to EUR3,000 per annum. Considering the two increases together would result to a minimum annual burden of EUR3,210.

This minimum annual charge will apply to corporate entities in Luxembourg, subject to the following conditions:

• as mentioned above, the entity must be subject to corporate income tax in Luxembourg;

• the activities of the entity must not require an approval of a minister or a supervisory authority; and

• the total financial fixed assets, transferable securities, cash at bank, cash in postal checking accounts, checks, and cash in hand of the entity must exceed 90 percent of its total assets.

For any collective entities subject to Corporate Income Tax other than those detailed above (including Luxembourg permanent establishments, and real estate in Luxembourg belonging to foreign undertakings) it is proposed that a progressive flat tax should be introduced based on the value of total assets of entities.. The amount, including the Solidarity Surcharge of 7%, would range from EUR535 per annum for total assets up to EUR350,000 to EUR21,400 for total assets up to  EUR20,000,000.

This minimum flat tax applies only to collective entities paying no taxes (i.e. they are in a tax loss position) or their tax liability is less than the above mentioned amounts, depending on which situation they fall into.

The new rules are currently under discussion by the Luxembourg Parliament and it is expected that they will be voted by the end of the year, so that they become effective as from 1 January 2013.


The planned increase is expected to decrease the popularity of Luxembourg as a holding company jurisdiction, which was anyway hampered after the introduction of the minimum tax of EUR1,500 in 2011.

Those who are not willing to incur the increased charges need to act quickly considering that the changes will become effective very soon. Having presence also in Cyprus and Singapore, puts Fiducenter in a very good position not only in assessing the impact on existing structures in Luxembourg but also for proposing restructuring solutions making use of the attractive tax and legal regimes of the aforementioned jurisdictions. We would be glad to discuss any cases you might have in mind and to provide you with any further information or clarification you may require.

George Savvides




Phone: 357 25 50 40 00 Fax: 357 25 50 41 00

© Fiducenter (Cyprus) Ltd

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No part of this publication may be reproduced, sorted in a retrieval system, or transmitted, in any form or by means, electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Fiducenter (Cyprus) Ltd.

The information provided in this publication does not constitute legal, tax or investment advice and no responsibility is accepted for any loss occasioned directly or indirectly as a result of persons acting, or refraining from acting, wholly or partially in reliance upon it.


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