Key taxes levied in Luxembourg include:
Luxembourg levies an annual corporate income tax (impôt sur le revenu des collectivités) on the net worldwide profit of Luxembourg companies, subject to the application of double-taxation treaties.
An annual municipal business tax (impôt commercial communal) is levied on the net profit of Luxembourg companies for the benefit of local authorities, according to rates set by each municipality.
Luxembourg levies an annual net worth tax (impôt sur la fortune) on the net assets of Luxembourg companies in accordance with the net worth tax law of October 16, 1934.
- Withholding taxes
- Dividends: Dividends distributed by a Luxembourg company to its shareholders are, as a rule, subject to a withholding tax at the rate of 15%, or 17.65% if the tax is borne by the distributing company
- Interest: Arm’s-length interest paid by a Luxembourg company is generally not subject to withholding tax
- Liquidation proceeds: Proceeds derived from a complete or partial liquidation paid by a Luxembourg company are not subject to withholding tax in Luxembourg
- Royalties: Royalties paid by a Luxembourg company are generally not subject to withholding tax in Luxembourg
- Directors’ fees: Fees paid to directors or statutory auditors are subject to a withholding tax levied at the rate of 20% on the gross amount paid (25% if the withholding tax is borne by the payer)
As an EU member state, Luxembourg has transposed into national law provisions of the EU directives on value-added tax, including the amended sixth VAT Directive. The interpretation of Luxembourg VAT law is thus widely based on case law from the European Court of Justice
Registration duties are generally levied on the transfer of certain assets, and are collected by the tax authorities upon registration of the deed evidencing the transfer
- Customs and excise duties
As an EU member state, Luxembourg is part of a single market that does not involve customs barriers to ensure the free circulation of goods. Imports from another EU member state are not subject to customs duties, but goods imported from outside the EU may be subject to customs duties levied on their customs value, determined according to the Common Customs Tariff
VAT registration process
Entities performing an activity conferring the status of a taxable entity must as a rule register with the Luxembourg Registry (Administration de l’enregistrement et des domaines) for VAT purposes within 15 days of beginning the activity.
However, VAT registration is not compulsory, among other conditions, if all activities carried out by the taxable entity are exempt from VAT - for instance, financial and insurance transactions - and thus do not entitle it to deduct input VAT.
How can we help?
Our tax law practice comprises around 50 experts, divided into dedicated VAT, transfer pricing and tax compliance teams, who provide bespoke advice and assistance to international and Luxembourg clients, including fund promoters, managers and investors, banks and insurance/reinsurance companies, multinational corporations and high-net-worth individuals in areas including fund formation, private equity, real estate, M&A and financing transactions, as well as wealth planning.
Our team provides a full range of tax services:
- Tax advisory: providing customised advice on all areas of tax, including tax structuring, rendering tax opinions, coordinating the work of local tax advisors in cross-border transactions, liaising with the Luxembourg tax authorities in contentious and non-contentious matters, and assisting clients during tax audits, conducting international tax surveys, estate planning and succession
- Transfer pricing: providing strategic transfer pricing advice, drafting transfer pricing reports for all kinds of transaction and industry, including conducting value chain analysis, functional/risk analysis, benchmarking and filing advance pricing agreements
- Tax compliance: providing all corporate tax compliance services for direct taxes and VAT, including initial and periodical tax returns and calculating tax provisions, conducting tax due diligence and assisting our clients with regard to the Foreign Account Tax Compliance Act and Common Reporting Standard reporting
- Tax litigation: conducting litigation regarding all areas of tax, including VAT and transfer pricing, before domestic courts and the European Court of Justice
In addition to corporate taxation, our team also offers specialist assistance in the following fields:
- VAT: our team has extensive expertise in VAT and other indirect taxes, and provides a full range of VAT services, including advisory, compliance and litigation
- Financial reporting and accounting standards: assistance with the accounting treatment of complex transactions for listed or non-listed companies in local GAAP or IAS
- Private clients: advising HNWIs, families and entrepreneurs on all tax issues related to the structuring of their wealth, as well as assisting in their estate and business succession planning