Legislative proposals for specific measures to modernise the Tax system

Taxation

In its meeting on 24 September, the Plenary Assembly of the Chamber of Commerce approved specific measures to modernise the Luxembourg tax system. These measures were chosen on the basis of the following common criteria. On the one hand, they are not expected to have a significant negative budgetary impact, which is especially important in the current period when public finances have been under great pressure. On the other hand, they are likely to benefit all companies and thus contribute to promoting overall general economic interest. In addition, some of them aim to reinforce legal certainty and facilitate the simplification of administrative procedures.

Based on feedback from the House of Entrepreneurship, the House of Startups and several members of the Chamber of Commerce, these measures have been selected in collaboration with the UEL with a view to an extensive ongoing dialogue with the Ministry of Finance and to reach concrete legislative proposals. The measures proposed are detailed in the document available in French here and are part of a constructive and complementary approach to the recurrent structural proposals on taxation formulated by the Chamber of Commerce in its opinions on tax matters and in particular in the context of its annual budget opinion. This ad hoc initiative should neither replace nor delay any measures aimed at addressing the need for a more comprehensive tax reform as soon as the budgetary situation allows for the absorption of reduced fiscal income in the short term, but which can also be compensated for in the future through enhanced competitiveness and tax attractiveness.

Indeed, substantive measures must be taken at this time as certain post-Brexit/Covid measures have been adopted by competitor states and aim to selectively and strategically alleviate corporate taxation. Furthermore, the effects of recent decisions on digital and/or minimum taxation, although difficult to quantify at this stage, deserve additional efforts to improve the attractiveness of the Luxembourg tax framework globally. These measures are structured around three strategic axes: (i) easing the tax burden, (ii) reinforcing taxpayer's rights, and (iii) the coherence of the texts:

Axe 1: Tax burden temporality   

• Measure 1: use of loss carry-back
• Measure 2: carry-over of net wealth tax to corporate income tax in case of loss without prior reserve
• Measure 3: automatic compensation of all taxes combined within a single digital tax file

Axe 2: Reinforcing taxpayer rights

• Measure 4: disclosure of losses in the tax assessment form and right to appeal
• Measure 5: suspension - possibly partial - of the payment of the tax debt in the event of a dispute over (i) the amount claimed and (ii) the guarantee call
• Measure 6: reduction of limitation periods
• Measure 7: reciprocity of procedures between the Administration and taxpayers

Axe 3: Legal coherence

• Measure 8: uniform application of administrative circulars
• Measure 9: adjusting the deadline for filing income tax returns in relation to the deadline for the approval of the accounts
• Measure 10: aligning the duration of the ‘recapture’ period with the duration of the availability of loss carry-over

These proposals are explained in more detail in the document made available in French here: Mesures fiscales ponctuelles..