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LUXEMBOURG VAT LAW DEVELOPMENTS

On 13 March 2009, the Luxembourg Government agreed on a draft law to transpose, into the Luxembourg VAT legislation, the newly adopted EU VAT legislation (the so-called “VAT package”). From 1 January 2010, the reverse charge rule will be extended to become the main rule for the supply of cross-border services.

In the framework of business-to-business relationships, the recipient of services supplied cross-border will be liable to tax except in the case of certain types of services, such as restaurant and catering services, hiring of transport, cultural, sporting, scientific and educational services for which taxation is still at the place of consumption or for services connected with immovable property, at the place where it is located.

For business-to-consumer services, the place of taxation will continue to be, in principle, where the supplier is established. In addition, EU Sales Lists for intra-EU supplies of services will be introduced. These will be filed on monthly basis (by the 15th of each month for electronic filing).

Luxembourg VAT law includes the reverse charge rule. The reverse charge rule applies to most supplies of services where the supplier is not a resident and does not have a permanent establishment in Luxembourg. The invoice must refer to the local tax law provision under which the tax liability is transferred to the recipient.

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UK RESIDENTS SUBJECT TO SAVINGS WITHHOLDING TAX AS FROM 2010

The Luxembourg tax authorities issued a circular on 12 October 2009 stating that as from 1 January 2010 UK resident non-domiciled persons will be considered as within the scope of the EU Savings Directive in respect of income on Luxembourg based savings. Up to that time they had been excluded. This means that savings withholding tax of (currently) 20% will need to be applied on interest paid or attributed to such persons unless they opt for the exchange of information and/or the tax certificate procedure.

Additionally, even if savings withholding tax is applied as from 2010, a credit or deduction of such withholding must always be available in the state of residence.

• LUXEMBOURG VAT LAW DEVELOPMENTS
• EU SAVINGS DIRECTIVE
• UK RESIDENTS SUBJECT TO WITHHOLDING TAX AS FROM 2010
• CERTIFIED COPIES OF LEGAL DOCUMENTS NO LONGER REQUIRED
• THE DEMISE OF THE LUXEMBOURG 1929 HOLDING COMPANY
• HT GROUP MONTHLY NEWSLETTERS

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LUXEMBOURG ABOLISHES THE OBLIGATION TO PROVIDE A CERTIFIED COPY OF AN ORIGINAL DOCUMENT

Due to the economic and financial crisis the Luxembourg Parliament has recently taken several measures in order to simplify the administrative procedures.

One of them concerns a Law of 29 May 2009, which abolishes the obligation to provide a certified copy of an original document. According to this new bill, a certified copy of an original document delivered by a Luxembourg administrative authority or an administrative authority from another Member State of the European Union to be submitted in an administrative procedure of the State, commune or any other legal person, can no longer be requested.

In case of any doubt about the validity of the copy which has been produced, the authorities may request the presentation of the original, provided such a request indicates the reason.

The presentation of a certified copy of an original document will still be requested in case of documents issued by authorities of a country which does not belong to the European Union.

The Law came into force on 8 June 2009.

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DEMISE OF THE 1929 HOLDING COMPANY – WHAT NEXT?

The classic Luxembourg 1929 Holding Company, so called because it was incorporated under the law of 1929, is to die a peaceful death on 31 December 2010.  The regime was held to be an illegal state aid by the European Commission, and Luxembourg concurred by abolishing the regime in 2006.  No new Luxembourg Holding Companies were allowed to be formed, but existing ones were allowed to remain in existence under the “grandfathering” rule, provided there was neither a change of economic beneficiary nor of the objects of the Company.

A Luxembourg Holding Company, unless converted to another form of Luxembourg Company or migrated out of Luxembourg before the end of 2010, will convert automatically to a SOPARFI (Société de Participations Financières).  This is a Luxembourg holding company which, in principle, is fully taxable but with good tax planning can end up paying little tax or even none.

Losses incurred by a Luxembourg Holding Company before its conversion to a SOPARFI may not be carried forward into the SOPARFI, which will start its corporate taxable life with a zero taxable profit or loss situation.

With nine months to go, this is a good opportunity to decide what is to be done with Luxembourg Holding Companies and prepare the planning and timing of the conversion so that a maximum amount of taxable losses are available once life begins as a SOPARFI, and conversely a maximum amount of non-taxable gains are earned before the conversion.  Planning also becomes important in the case of gains earned while a Luxembourg Holding Company.   Although these will not be liable to income tax, the assets such gains represent will certainly attract wealth tax unless sheltered.  At 0.5% of taxable wealth, this represents a 250% increase on the taxe d’abonnement (capital tax) that a Luxembourg Holding Company pays.

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EU SAVINGS DIRECTIVE

Luxembourg banks and other Luxembourg Financial Service Providers are required to withhold tax at a rate of 20% from interest paid on the accounts of EU residents (other than Luxembourg residents), unless the account holder has elected to send the following information to the tax authorities of the country in which they are resident: information about the period; the amount of interest paid; and the account holder’s identity.

This rate was 15% from 1 January 2005 to 30 June 2008 and will increase to 35% from 1 July 2011

Although Luxembourg participates in various OECD programs, it is not involved in an international tax enforcement program.