Approval of the 2019 Budget Law

On 25 April 2019, the Chambre des Députés approved the Bill of Law 7450 as part of the draft Luxembourg budget for the 2019 financial year which will now become law (“Budget Law”).

The Budget Law contains two main measures with respect to corporate tax.

First, the Budget Law provides for a reduced corporate income tax ("CIT") rate which shifts from 18% to 17% resulting in an overall income tax rate of 24.94% for companies established in Luxembourg-city (this figure includes the municipal business tax and the solidarity surcharge).

Also the Budget Law extends the reduced 15% CIT rate to taxable income not exceeding EUR 175,000 (this reduced rate was formerly applicable to taxable income not exceeding EUR 25,000).

In addition, taxable income ranging between EUR 175,000 and EUR 200,001 will be taxed at a rate corresponding to EUR 26,250 plus 31% of the taxable income exceeding EUR 175,000.

Another salient measure introduced by the Budget Law is the amendment of Article 164bis of the Luxembourg income tax law ("LITL") to transpose the option offered by the anti-tax avoidance directive (ATAD) to apply the new interest limitation rule (laid down in Article 168bis LITL) at the level of the tax unity.

For more information regarding this topic, please refer to our article "Luxembourg Tax Unity Regime" available on our website.

The CIT rate reductions will be applicable for the 2019 tax year and the amendment of article 164bis LITL will be applicable to accounting years starting as of 1 January 2019.