Expected to be effective from 1 January 2025, Luxembourg’s bill of law 8388, introduced on 23 May 2024, proposes several important amendments to the country’s tax legislation. This bill aims to enhance legal certainty and align with recent case law and constitutional court decisions.
Key provisions include:
– Minimum net wealth tax (MNWT): Simplification of the MNWT regime by reducing the number of applicable brackets and adjusting tax rates. The expected new MNWT rates will be EUR 535 for balance sheets up to EUR 350,000, EUR 1,605 for those between EUR 350,000 and EUR 2,000,000, and EUR 4,815 for balance sheets exceeding EUR 2,000,000.
– Tax treatment of share class redemptions: The Bill specifies that, according to Luxembourg case law, liquidation proceeds should be treated as capital gains in the event of a (partial) liquidation without withholding tax in Luxembourg. Income obtained from the repurchase of a participation, including a class of shares, followed by a reduction of share capital within six months is considered liquidation proceeds (exempt from Luxembourg withholding tax), provided the principle of abuse of law is not violated and that specific conditions to distinct economic rights and fair market value repurchase price are met.
– Participation exemption regime: The bill offers taxpayers the option to forgo the participation exemption benefit when it applies solely based on the acquisition price criterion (EUR 1.2 million for dividends and liquidation proceeds or EUR 6 million for capital gains). Taxpayers will also have the choice to opt out of the 50% partial exemption regime for dividends.
– Digitalisation of tax filings: Extension of electronic filing obligations to various tax returns, including those for withholding tax on directors’ fees and employment-related taxes, aiming to modernise and streamline tax administration processes.
Corporate entities are encouraged to review these impending changes and assess their potential impact on their tax obligations and compliance processes. Early preparation and adaptation will ensure a seamless transition and optimal alignment with the new regulations.
For detailed guidance and support, please contact our Corporate Tax Team led by Mathieu Ledoux.
Expected to be effective from 1 January 2025, Luxembourg’s bill of law 8388, introduced on 23 May 2024, proposes several important amendments to the country’s tax legislation. This bill aims to enhance legal certainty and align with recent case law and constitutional court decisions.
Key provisions include:
– Minimum net wealth tax (MNWT): Simplification of the MNWT regime by reducing the number of applicable brackets and adjusting tax rates. The expected new MNWT rates will be EUR 535 for balance sheets up to EUR 350,000, EUR 1,605 for those between EUR 350,000 and EUR 2,000,000, and EUR 4,815 for balance sheets exceeding EUR 2,000,000.
– Tax treatment of share class redemptions: The Bill specifies that, according to Luxembourg case law, liquidation proceeds should be treated as capital gains in the event of a (partial) liquidation without withholding tax in Luxembourg. Income obtained from the repurchase of a participation, including a class of shares, followed by a reduction of share capital within six months is considered liquidation proceeds (exempt from Luxembourg withholding tax), provided the principle of abuse of law is not violated and that specific conditions to distinct economic rights and fair market value repurchase price are met.
– Participation exemption regime: The bill offers taxpayers the option to forgo the participation exemption benefit when it applies solely based on the acquisition price criterion (EUR 1.2 million for dividends and liquidation proceeds or EUR 6 million for capital gains). Taxpayers will also have the choice to opt out of the 50% partial exemption regime for dividends.
– Digitalisation of tax filings: Extension of electronic filing obligations to various tax returns, including those for withholding tax on directors’ fees and employment-related taxes, aiming to modernise and streamline tax administration processes.
Corporate entities are encouraged to review these impending changes and assess their potential impact on their tax obligations and compliance processes. Early preparation and adaptation will ensure a seamless transition and optimal alignment with the new regulations.
For detailed guidance and support, please contact our Corporate Tax Team led by Mathieu Ledoux.
