Key changes for 2018

The most important changes can be summarised as follows:

• Extension of the investment tax credits to acquired software from unrelated parties and zero-emission cars;
• Amendment of Article 171 of the Luxembourg income tax law to clarify the tax exemption of capital gains realised in the context of a merger;
• Extension of the VAT exemption for management of investment fund services to include collective internal funds held by a life insurance undertaking whose investment risks are borne by the policyholders and which are subject to the supervision of the Luxembourg Insurance Authority (Commissariat aux assurances) or equivalent supervision in another EU Member State;
• Reduction of the corporate tax rate from 19% to 18%, leading to an effective combined tax rate of 26.01% for corporate entities established in Luxembourg City;
• Introduction of amendments to the current tax regime of stock option plans by way of the new circular letter LIR - No 104/2. In particular, the valuation of freely negotiable options has been increased as of 1 January 2018 from 17.5% to 30% of the value of the underlying stock;
• For sales of immovable property, the maximum tax rate is 10.5% (quarter of the overall rate) for income earned during the period from 1 July 2016 to 31 December 2018 (initially due to end on 31 December 2017); and
• Furthermore, the legislative process of draft Bill of law 7163 regarding a new preferential IP tax regime is on its way.

For further information, please refer to our Newsletter December 2017.