The Luxembourg Prime Minister Jean-Claude Juncker presented on 8 May tax measures envisaged by the government as part of his annual statement on Luxembourg's economic, social and financial situation. Mr Junker's speech was complementary to savings measures presented by Finance Minister Luc Frieden at the end of April and still reflects the necessity to balance the State's budget. However, despite of the crisis and continuous efforts to sustain investments in infrastructure, education and new technologies, no significant increase of taxes has been announced. None of the measures discussed will significantly impact companies established in Luxembourg in the forseeable future. Main increases of taxes relate to individuals with high revenues.

  1. Proposed tax measures:

Individuals

  • The crisis contribution of 0.8% will not be reintroduced, but the solidarity surtax should be increased by 2%. Combined with Mr Frieden's previous annoucements, it means that the current solidarity surtax of 4% should reach 6%. The solidarity surtax borne by taxpayers with high revenues (single taxpayers earning more than EUR 150,000 per annum and couples earning more than EUR 300,000 per annum) should be increased from 6% to 8%.
  • In addition, the income tax rate shall be increased for individuals with high revenues. Presumably, a new tax bracket may be added to the current maximal tax rate of 39%.
  • Child benefit will neither be reduced nor be taxed.

Corporations

  • The Prime Minister did not make any major statement regarding corporations. The computation of their tax basis, the possibility to benefit from certain tax credits and to carry forward losses shall remain unchanged. However, considering the envisaged augmentation of the solidarity surcharge, companies established in Luxembourg-City should be subject to an aggregate corporate income tax and municipal business tax of 29,22% as of 2013 (instead of the current rate of 28.80%). 
  • In addition, Finance Minister announcements at the end of April may lead to the introduction of a minimal annual tax regarding companies active in the industrial sector. More details are awaited in this respect.
  1. Specific measures in favor of the development of new technologies

Despite of the envisaged change of VAT rules applicable to electronic services rendered from Luxembourg as of 2015, the country will pursue its efforts on the development of new technologies. Investments in data centers, biotechnologies and electronic networks will remain the priority of the government.

  1. Others measures / announcements
  • The Prime Minister expressed his doubts on the feasibility of the introduction of the Financial Transaction Tax.
  • Empty houses/flats will be subject to a specific taxation (to be determined by the government) in order to help the rental market.
  • Excise duties on tobacco and on petrol should be slightly increased.
  • The VAT rate (currently 15% and reduced rates of 3% or 12%) will remain unchanged. However an increase is envisaged in the future.

A more detailed report will be published once more information is available on the newly announced tax measures. The conclusion so far is that, while Luxembourg government will pursue its efforts to sustain key sectors of the economy (such as education, communication, new technologies) and is adamant to balance its budget, envisaged measures shall not have any significant impact on the level of taxation of corporations and individuals and should thus not negatively impact the attractiveness of the country.