The 2018 legislative elections having delivered their results, the previous coalition formed by liberals (DP), socialists (LSAP) as well as ecologists (Déi Gréng) has been re-elected for another 5-year term. In the course of the coalition formation, a new coalition agreement (projet de gouvernement) has been signed by the parties, detailing, inter alia, the goals to be achieved in tax matters over the coming years.
While recalling the determination to continue a high level of investment, which requires an increase of tax revenues, the newly formed government emphasises that this should be achieved by attracting new taxpayers and by encouraging the economic development of existing ones. The country’s tax competitiveness, transparency and the prevention of tax avoidance will remain high priorities for the government. The tax aspects of the coalition agreement can be divided into two sections; one regarding individual taxpayers and one regarding corporate taxpayers.
For individual taxpayers, the government seeks simplification, digitalisation, and increasingly eco-friendly tax system. Simplification will be achieved by, e.g. introducing lump-sum exemptions for benefits-in-kind, simplifying the deductibility of charitable gifts and a reform of the various tax classes. The government will encourage digitalisation, by increasing the amount of tasks that can be performed digitally (electronic filing of tax returns and electronic delivery of various tax certificates). An increase in eco-friendliness of the Luxembourg tax system will be ensured by introducing new incentives with regard to the mobility of taxpayers (e.g. promotion of zero emission company cars), by encouraging teleworking for cross-border workers or by extending the super-reduced VAT rate (3%) for certain environmentally friendly home repair or renovation work. Finally, other tax measures such as a reduction of the VAT rate on basic sanitary products have been announced.
For corporate taxpayers, the new government confirmed its international commitment to the “level playing field” and its continued participation in the drawing up of new regulations at both the OECD and the EU Level, while remaining opposed to the idea of a financial transaction tax. The government also acknowledged that as a result of the evolving tax landscape, the corporate tax base has been broadened, so that in order to remain competitive within the other OECD and EU countries, a reduction of the aggregate tax rate by 1% in 2019, as well as an increase of the tax bracket subject to the reduced 15% corporate income tax rate (from EUR 25,000 to EUR 175,000) is envisaged. Finally, the government confirmed its continuing objective of attracting company executives and highly qualified individuals, which should be achieved by a favourable amendment to the existing “impatriate” regime.
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