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Luxembourg To Amend Law On Tax Exempt Holding Companies

by Ulrika Lomas, for LawAndTax-News.com, Brussels

26 November 2003


Luxembourg's Ministry of Finance has recently published draft legislation designed to amend the law with regard to tax-exempt 'Holding 29' companies as a result of international pressure, it emerged this week.

Under the terms of the new law, which the government hopes to put in place by January 2004, the holding companies will only be permitted to receive 5% of their dividends from low tax entities. If they receive more than this from a low tax entity (which for the purposes of the draft law is defined as an entity taxed at a level below 11%), they will lose their tax exempt status.

Speaking to the LMG news service, international tax partner with Ernst & Yound in Luxembourg, Marc Schmitz explained that:

"There were certain features which were more precisely considered as being harmful. Holding 29 companies could receive dividends from low tax entities without being subject to tax in Luxembourg so the government had to act on that."

He concluded by observing that:

"It will become difficult to use holding companies to repatriate profits from tax haven companies via dividends."


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