Post by Sapphire Capital on Aug 20, 2008 2:39:17 GMT 4
Luxembourg: Capital duty on its way out
In his traditional state of the nation speech before parliament on May 22 2008, the prime minister, Jean-Claude Juncker, announced various tax measures aimed at maintaining and improving an attractive tax environment in Luxembourg. The measures relevant for international businesses are summarised below:
Abolition of the capital duty as from 2009
The abolition of the 0.5% capital duty in 2009 is probably the most expected tax measure. It follows the reduction of the capital duty from 1 to 0.5% in 2008. The complete abolition of the capital duty in Luxembourg had been announced by the government at the time of the reduction to 0.5% but had become uncertain following council directive 2008/7/EC of February 12 2008 as the directive no longer obliges EU member states to abolish capital duty within a certain timeframe, while it did in its draft version.
The abolition of capital duty will improve the attractiveness of Luxembourg for foreign investors. Luxembourg was one of the few EU countries still levying a tax on capital contributions. Even though the capital duty cost could be managed or at least reduced either by the use of alternative funding such as debt instruments or by carefully structuring the investment, it was still a cost that had to be monitored by investors and their advisers. Thus, the definitive abolition of the capital duty will make the life of investors easier, when investing in Luxembourg.
Decrease in corporate tax rates
A decrease of the global income taxation of companies (corporate income tax and municipal business tax) from 29.63% to 25.5% has been announced. This will however occur in two steps and will probably, where possible and necessary, says Juncker, be accompanied by some tax measures that will aim at enlarging the taxable basis of companies. The exact timing has not been confirmed but it is expected that the decrease will happen within two years with a first decrease of the rate in 2009 followed by a second one in 2010.
The decrease of the global corporate income tax rate makes sure that Luxembourg remains competitive not only in the EU but also on a global basis. In 2007, with a rate of 29.63%, Luxembourg had a rate which was approximately 3% higher than the EU average and approximately 4% higher than its worldwide competitors. The Luxembourg government realised that something had to be done in this area and the Luxembourg market place welcomes the decision of the government to act accordingly.
Source:
Keith O'Donnell (keith.odonnell@atoz.lu)
Samantha Nonnenkamp (samantha.nonnenkamp@atoz.lu),
ATOZ Luxembourg
In his traditional state of the nation speech before parliament on May 22 2008, the prime minister, Jean-Claude Juncker, announced various tax measures aimed at maintaining and improving an attractive tax environment in Luxembourg. The measures relevant for international businesses are summarised below:
Abolition of the capital duty as from 2009
The abolition of the 0.5% capital duty in 2009 is probably the most expected tax measure. It follows the reduction of the capital duty from 1 to 0.5% in 2008. The complete abolition of the capital duty in Luxembourg had been announced by the government at the time of the reduction to 0.5% but had become uncertain following council directive 2008/7/EC of February 12 2008 as the directive no longer obliges EU member states to abolish capital duty within a certain timeframe, while it did in its draft version.
The abolition of capital duty will improve the attractiveness of Luxembourg for foreign investors. Luxembourg was one of the few EU countries still levying a tax on capital contributions. Even though the capital duty cost could be managed or at least reduced either by the use of alternative funding such as debt instruments or by carefully structuring the investment, it was still a cost that had to be monitored by investors and their advisers. Thus, the definitive abolition of the capital duty will make the life of investors easier, when investing in Luxembourg.
Decrease in corporate tax rates
A decrease of the global income taxation of companies (corporate income tax and municipal business tax) from 29.63% to 25.5% has been announced. This will however occur in two steps and will probably, where possible and necessary, says Juncker, be accompanied by some tax measures that will aim at enlarging the taxable basis of companies. The exact timing has not been confirmed but it is expected that the decrease will happen within two years with a first decrease of the rate in 2009 followed by a second one in 2010.
The decrease of the global corporate income tax rate makes sure that Luxembourg remains competitive not only in the EU but also on a global basis. In 2007, with a rate of 29.63%, Luxembourg had a rate which was approximately 3% higher than the EU average and approximately 4% higher than its worldwide competitors. The Luxembourg government realised that something had to be done in this area and the Luxembourg market place welcomes the decision of the government to act accordingly.
Source:
Keith O'Donnell (keith.odonnell@atoz.lu)
Samantha Nonnenkamp (samantha.nonnenkamp@atoz.lu),
ATOZ Luxembourg