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Luxembourg: Interest limitation, reduced corporate tax rate (2019 budget bill)

Luxembourg: Interest limitation, reduced corporate tax

The Luxembourg government on 5 March 2019 presented a bill (no. 7450) with respect to the 2019 budget law that includes certain tax measures announced at the end of 2018.

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  • Concerning corporate income tax—the bill introduces additional provisions on interest limitation and fiscal unity, with the interest limitation rule to be expanded to apply at the level of the fiscal unity (and not simply on the current “standalone” basis).
  • Concerning the corporate income tax rate—the bill would reduce the rate from 18% to 17% so that there would be a “global corporate tax rate” of 24.94% (18.19% of corporate income tax including the contributions to unemployment fund, plus 6.75% of municipal business tax) for companies established in Luxembourg City as from tax year 2019.
  • Concerning value added tax (VAT)—the “super-reduced” VAT rate (3%) that applies for electronic books, publications and online press would be extended. The super-reduced VAT rate would also apply to essential hygienic items or products. Finally, plant protection products authorized for organic agriculture would benefit from the application of a “reduced” VAT rate of 8%.These measures would be effective 1 May 2019.
  • Concerning individual income tax—a minimum social salary tax credit (crédit d'impôt salaire social minimum) that would increase the minimum social salary by €100 net per month, would be established, effective retroactively from 1 January 2019.
     

Read a March 2019 report prepared by the KPMG member firm in Luxembourg

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