LUXEMBOURG
GENERAL INFORMATION
Once you have created your Luxembourg Company, you will need tax advice on a regular basis. We have a team of specialists who can give you that advice and complete your annual Luxembourg Tax Returns.
You will find the following information useful on corporate tax and also there are many personal tax tips on our Personal Tax pages.
In principle, Luxembourg resident companies are subject to corporate income tax on worldwide income and capital gains, while non-resident companies are only subject to corporate income tax on Luxembourg sourced income. However, tax treaties generally exclude the following from the tax base of companies:
• foreign branch profits and gains, and
• foreign income and gains from real estate.
The partners who make up partnerships are subject to tax at progressive marginal income tax (38%) with a minimum of 15% rate for non-residents. Limited liability companies and cooperative societies are subject to tax at the corporate income tax rate (21%).
RESIDENCY
A company is a resident of Luxembourg if:
• the company’s registered office is in Luxembourg, or
• the company’s management and control are situated in Luxembourg.
Therefore, a company incorporated in a foreign country may be treated as resident if Luxembourg is its place of management.
THE LUXEMBOURG TAX YEAR
The Luxembourg tax year is the calendar year. However, the tax authorities may approve a tax year ending on a different date, particularly when the accounting date of a group of companies does not end with the calendar year. If a business chooses an alternative tax year, the tax return period is based on the alternative tax year. Where a change in the rate of corporate income tax occurs for a calendar year, profits of a non-calendar accounting year are taxed at the rate applicable on its year end date.
ANNUAL TAX RETURN
Although the official deadline for filing tax returns is three months after the end of the tax year, entities subject to corporate income tax must file an annual tax return before 31 May of each year. The filing date may be extended upon request. Taxpayers may make this request in writing or verbally. The tax authorities may allow an extension for filing to 31 October. Only VAT forms may be filed electronically.
CORPORATE INCOME TAX PAYMENT DATES
A taxpayer must make advance payments quarterly on 10 March, 10 June, 10 September and 10 December based on the tax assessment of the preceding year. A taxpayer usually must pay their corporate income tax within one month of receiving a tax assessment. Withholding taxes must be paid within eight days from the date the company pays out income subject to withholding.
LATE PAYMENT PENALTY
If a taxpayer makes a late payment, a penalty of 0.6% interest per month accrues on the total tax due. In addition, if a taxpayer fails to file or late files a return, a penalty equal to 10% of the tax due may apply.
DATES FOR OTHER TAX PAYMENTS
Taxpayers must make advance payments for net worth tax quarterly on 10 February, 10 May, 10 August and 10 November, according to the last assessment made. Additionally, taxpayers must make advance payments for municipal business tax (MBT) on the same dates as above, according to the last assessment made.
TAX ASSESSMENTS
The Luxembourg Government is currently examining the opportunity to introduce a new process of assessment. Under this new process, it would issue a provisional assessment following the receipt of the tax declaration. The tax inspector would have five years to contest the declaration before taxation becomes final.
A final assessment occurs after the tax return is filed and checked. A final assessment takes into consideration advance tax payments. A taxpayer has the right to object or to appeal the final assessment within three months of the date of receipt of the assessment.
We can complete your tax returns for you and check the tax assessments when they arrive. You just need to contact us to find out how we can help.