Luxembourg Adopts Anti-Crisis Bill

by Ulrika Lomas, Tax-News.com, Brussels

16 July 2010

During a recent meeting, Luxembourg’s governing council adopted the draft law introducing tax measures relating to the financial and economic crisis. The bill aims to implement tax measures designed to balance the public finances and to introduce a new levy, namely a ‘crisis contribution’ (la contribution de crise).

Unveiled recently by the government, the key tax initiatives contained in the bill are as follows:

• A new top rate of income tax of 39% is introduced above the current maximum rate of 38%. The new rate will apply to income of EUR41,793 for class 1 income, and to income of EUR83,586 for class 2 (tax 'classes' in Luxembourg apply in respect of familial and residential status).
• The government plans to increase the maximum special rate of depreciation accorded to companies investing in environmental or energy-saving initiatives from 60% to 80%.
• A ceiling will be imposed as regards the tax deductibility of severance pay. Severance pay in excess of EUR300,000 will no longer be tax deductible.
• A minimum levy of EUR1,500 will be imposed on organizations of a collective nature whose activity is exempt from any licensing and where the sum of financial assets, securities and banking assets exceeds 90% of the total balance.
• The solidarity tax (l’impôt de solidarité) imposed on individuals will be increased from 2.5% to 4%. Regarding taxable income in excess of EUR150,000 for class 1 and 1a and taxable income of EUR300,000 for class 2, the contribution rate for the employment fund is due to increase to 6%. The contribution to the employment fund payable by collectives is also set to increase by 1%, rising from 4% currently to 5%.
• A “crisis contribution” of 0.8% will be introduced for 2011 and 2012, payable by individuals and imposed on all earned income. There is, however, a reduction on wages, corresponding to the minimum wage.
.

Recommended