Luxembourg: New tax measures included in budget law for 2021

Luxembourg: New tax measures included in budget law

Luxembourg’s Parliament on 17 December 2020 passed the 2021 budget law that includes several new tax measures concerning the real estate sector, the fiscal unity regime, and other areas. A request to be exempted from the second vote was filed with the State Council.


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Other measures in the budget legislation introduce new changes regarding individual (personal) income taxation, including repeal of the treatment of stock options and warrant plans, as well as changes to the “impatriate regime.” Along these lines, the Luxembourg tax authorities announced the withdrawal of Circular L.I.R. n° 104/2 of 29 November 2017 on stock option and warrant plans and Circular L.I.R. n° 95/2 of 27 January 2014 regarding the Luxembourg impatriate regime.

In other news:

  • The Luxembourg tax authorities issued a circular that excludes companies incorporated in Gibraltar from the companies eligible for the benefits of the EU Parent-Subsidiary Directive for the purpose of the application of the Luxembourg participation exemption regime (effective 1 January 2021).
  • The six-month deferral period for the law implementing DAC 6 reporting for cross-border arrangements ends 1 January 2021, and the 30-day period for reporting cross-border arrangements will start beginning in 2021. Any cross-border arrangements triggering a reporting obligation between 1 July 2020 and 31 December 2020 will have to be reported by 30 January 2021. In addition, intermediaries covered by legal professional privilege will have to notify other intermediaries and, in certain cases, taxpayers of their reporting obligation. The notification is due within 10 days, with a first deadline on 10 January 2021 for arrangements with a trigger date between 1 July 2020 and 31 December 2020.
  • The Multilateral Instrument (MLI) entered into force for Luxembourg on 1 August 2019, and applies for tax periods beginning on or after 1 January 2020 for withholding taxes, and for tax periods beginning on or after 1 February 2020 for other taxes. For calendar year taxpayers, the first implications of the MLI on other taxes start 1 January 2021.

Read a December 2020 report prepared by the KPMG member firm in Luxembourg

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