2020 saw many EU Court cases impacting the Luxembourg market and requiring the law maker to ensure compliance with key decisions. What does this mean for Luxembourg? We review the key decisions below.
Amendment to the fiscal unity regime
With another amendment made to the fiscal unity regime, here’s a quick recap of all the changes made from 2015 until present day.
As of 2015:
- amendment to the Luxembourg fiscal unity regime in order to allow horizontal fiscal unities for resident subsidiaries of the same non-resident parent company
Court of Justice of the EU decision 14 May 2020:
- dissolution of an existing vertical fiscal unity required to enter into a horizontal one is contrary to EU law
Budget law 2021
Amendment to the fiscal unity regime complying with EU law.
Conditions for neutral switch from vertical to horizontal fiscal unity:
- The integrating parent of the existing group becomes the integrating subsidiary of the new group
- The change must apply for tax year 2022 at the latest
- The new group must be broader in scope than the existing group
Gibraltar and the participation exemption regime
The CJEU decision on 2 April 2020 (C-458-18) sparked the response by the Luxembourg tax authority with the Luxembourg Circular dated 1 December 2020. The Circular covers the application of Luxembourg participation exemption regime for companies established in Gibraltar.
The Circular states that from 1 January 2021, NWT exemption on Gibraltarian subsidiaries and exemption from CIT and MBT on inbound dividend from Gibraltar do not apply anymore, unless the comparable tax test is met. Additionally, the withholding tax (WHT) exemption on dividend to Gibraltar resident companies will no longer apply.
Table of contents
Alignment with CJEU decisions