On December 14th 2016, the 2017 tax reform law was voted and later published on December 27th 2016 in the official gazette (hereafter the “Law”). For further details on the 2017 tax reform please refer to our August legal alert.

The most important changes impacting corporate and individual taxpayers are recapped below:

Corporate taxpayers:

  • The corporate income tax rate is decreased to 19%, thus leading to an aggregate income tax rate of 27.08% (for Luxembourg-City). A further decrease to 18% shall be voted in 2018, thus leading to an aggregate income tax rate of 26.01% (for Luxembourg-City) for 2018;
  • Tax losses incurred as of the tax year 2017 going forward will have a limited carry forward of 17 years. Previously incurred tax losses will continue to be carried forward indefinitely. Losses incurred prior to 2017 will be used first;
  • Option to defer the deduction of the annual depreciation;
  • The minimum net wealth tax applicable for financial companies (i.e. companies whose assets are composed of more than 90% of financial assets and whose total balance sheet exceeds EUR 350,000) is increased from EUR 3,210 to EUR 4,815 as of 2017;
  • Compulsory electronic filing of income tax, municipal business tax and net wealth tax return as from the tax year 2017 going forward;
  • Extension of the joint and several liability of the directors for the payment of VAT: the management of a company has to ensure that the latter fulfils its VAT obligation and if there is a non-fulfilment by the company because of a fault (“inexécution fautive”) of the management, the VAT authorities are authorised to issue a “décision d’appel en garantie” to any of the directors who will, as a result, become liable for the VAT payment.

Individual taxpayers:

  • The final withholding tax on interest income (RELIBI) is increased from 10% to 20%;
  • The temporary budget balancing tax of 0.5% is abolished;
  • Two new tax brackets of 41% and 42% have been introduced for income exceeding EUR 150,000 and EUR 200,004 respectively.