Tax compliance services in Luxembourg

The business world is becoming increasingly regulated, which means that the obligation for companies to ensure compliance and transparency is more crucial than ever. Tax is rapidly becoming one of the largest compliance burdens, with the world witnessing raising tax rates and increased audit and administrative requirements. Lack of compliance to local regulations can result in fines and interest penalties that all companies would rather avoid. How do you ensure your compliance requirements are in hand?

The major types of taxes applicable to legal entities established in Luxembourg are:

Direct tax:

  • Corporate Income Tax – CIT

Corporate income tax is levied at a rate of 20% on capital companies whose taxable income is less than or equal to EUR 15,000; a rate of 21% applies to capital companies whose taxable income exceeds EUR 15,000. An additional charge of 7% is levied on CIT as a contribution to the employment fund.

  • Municipal Business Tax – MBT

The current municipal business tax is 3% of the adjusted taxable income x Municipal coefficient.

  • Net Wealth Tax – NWT

Based on the adjusted net asset value of a company as of 1 January 2016:

  • 0.5%, on a taxable base of up to EUR 500 million;
  • 0.05%, on the part exceeding EUR 500 million.

A minimum NWT charge applies for all resident corporate entities and ranges, depending on the volume of assets, from EUR 535 to EUR 32,100 (EUR 3,210 for entities whose “financial assets” exceed 90% of their total balance sheet and EUR 350,000).

  • Withholding Tax – WHT

General rate of 15% on gross dividends (17.65% on net dividends).

General rate of 20% on gross directors’ fees (25% on net directors’ fees).

Indirect tax:

  • Value added Tax – VAT

VAT is levied on supply of goods and services and on purchases from foreign suppliers under the conditions of the reverse-charge mechanism.

The standard VAT rate is 17% as of 1st January 2015. There exist various additional rates based on specific criteria:

  • 14% VAT is levied on i.e. wines, advertising and printed marketing materials and heating oil
  • A reduced VAT at the rate of 8% applies to i.e. gas and electricity
  • A super reduced VAT rate of 3% applies to i.e. books and other printed materials, water, pharmaceuticals, food products and to radio and television broadcasting services
  • Insurance Premium Tax – IPT

IPT is levied on insurance premiums, instead of VAT. The standard IPT rate is currently 4%.

Working closing with external tax advisors, our local specialists can help manage both your direct and indirect tax compliance requirements with a range of services to support your needs.  Our colleagues are on hand to help ensure reporting is complete and that timelines are observed, allowing for full control and transparency throughout the process.

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