Luxembourg

New Luxembourg investment tax credits regime to accelerate sustainability transformation  

On 19 December 2023, the Luxembourg Parliament voted to approve bill n°8276 aiming to revamp the investment tax credits available under article 152bis of the Luxembourg Income Tax Law. This aims at supporting Luxembourg companies in their digital and ecological/energetic transformation. The most significant change to the rules, in addition to the increase of applicable rates, consists of an inclusion of certain operating expenses connected with the digital/ecological transformation on which an 18% tax credit may apply. This change is expected to provide a strong incentive for companies to accelerate their digital and ecological/energetic transition.

Implementation of Pillar Two minimum taxation rules in Luxembourg

On 20 December 2023, the Luxembourg Parliament voted to approve the draft law n°8292 transposing the EU Council Directive 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the European Union, known as the EU Pillar Two Directive or the GloBE (Global anti-Base Erosion) Directive.

The Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-up Tax (QDMTT) are effective for fiscal years starting on or after 31 December 2023, whereas the Undertaxed Profits Rule (UTPR) would become effective for fiscal years starting on or after 31 December 2024.

The text of the law strictly adheres to the text of the EU Pillar Two Directive, with some additions introduced to reflect the Organisation for Economic Co-operation and Development (OECD) Administrative Guidance released in February 2023 and July 2023. Certain aspects remain unresolved, such as the possibility to rely on certain elections foreseen in the OECD Administrative Guidance.

Further amendments may be expected in the future to reflect some of the OECD Administrative Guidance that has so far not been included in the law and the additional OECD Administrative Guidance that was released on 19 December 2023.