Luxembourg's international tax competitiveness has been given a boost after the government announced it will reduce the country's corporate income tax rate and abolish capital duty.
In his statement on the economic, social and financial state of Luxembourg [In Luxembourgeois and French], the prime minster Jean–Claude Juncker announced that he will reduce the corporate income tax rate progressively from 29.63% to 25.5%. The first reduction will take effect on January 1 2009 followed by a further reduction in 2010.
The Luxembourg corporate tax rate consists of a nationwide rate of 22% on which a surcharge of 4% is levied and a local business tax rate which varies per community. The rate of 29.63% is the combined rate for Luxembourg City.
The abolition of capital duty as of January 1 2009 follows a previous cut in 2008 from 1% to 0.5% levied on capital contributions to companies and partnerships. The cut was sparked by an EU recommendation which called for member states to eliminate capital duty. The recommendation was amended with no provision to abolish the tax.
"This is a good surprise for Luxembourg as we didn't know if capital duty would be abolished or not. It makes things easier for investors as [capital duty] was one additional cost to consider when structuring investments," said Samantha Nonnenkamp from Atoz, a tax advisory firm in Luxembourg.
"The drop in the corporate income tax rate is also good for investors and puts Luxembourg at around average compared to the rates of its competitors. But to make the country more competitive, more needs to be done," Nonnenkamp said.
"As far as we know the government is working on several tax improvements," said Simon Paul from law firm Loyens & Loeff in Luxembourg. "These cuts improve the country's competitiveness but net wealth tax should be high on the agenda when looking to attract international investors. The government of course can't abolish everything but net wealth tax can be a problem for foreign investors," he said. "I think net wealth tax will be abolished at some point but I don't know when."
Guy Schuller, a spokesperson for the prime minister said: "Industry members probably think more needs to be done to boost Luxembourg's competitiveness further, but with general elections taking place next year, this is something for the next government to consider."(...)
In his statement on the economic, social and financial state of Luxembourg [In Luxembourgeois and French], the prime minster Jean–Claude Juncker announced that he will reduce the corporate income tax rate progressively from 29.63% to 25.5%. The first reduction will take effect on January 1 2009 followed by a further reduction in 2010.
The Luxembourg corporate tax rate consists of a nationwide rate of 22% on which a surcharge of 4% is levied and a local business tax rate which varies per community. The rate of 29.63% is the combined rate for Luxembourg City.
The abolition of capital duty as of January 1 2009 follows a previous cut in 2008 from 1% to 0.5% levied on capital contributions to companies and partnerships. The cut was sparked by an EU recommendation which called for member states to eliminate capital duty. The recommendation was amended with no provision to abolish the tax.
"This is a good surprise for Luxembourg as we didn't know if capital duty would be abolished or not. It makes things easier for investors as [capital duty] was one additional cost to consider when structuring investments," said Samantha Nonnenkamp from Atoz, a tax advisory firm in Luxembourg.
"The drop in the corporate income tax rate is also good for investors and puts Luxembourg at around average compared to the rates of its competitors. But to make the country more competitive, more needs to be done," Nonnenkamp said.
"As far as we know the government is working on several tax improvements," said Simon Paul from law firm Loyens & Loeff in Luxembourg. "These cuts improve the country's competitiveness but net wealth tax should be high on the agenda when looking to attract international investors. The government of course can't abolish everything but net wealth tax can be a problem for foreign investors," he said. "I think net wealth tax will be abolished at some point but I don't know when."
Guy Schuller, a spokesperson for the prime minister said: "Industry members probably think more needs to be done to boost Luxembourg's competitiveness further, but with general elections taking place next year, this is something for the next government to consider."(...)
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