Luxembourg: Tax Developments
Recent developments in Luxembourg, including treaties, the new social security and income tax parameters, and other tax matters.
Treaties
Protocol to Double Taxation Treaty (DTT) Luxembourg-Japan Entered into Force
The protocol, signed on 25 January 2010 in Luxembourg (published in Mémorial A – N° 146 of 21 July 2011) to the Luxembourg-Japan income and capital tax treaty of 5 March 1992, entered into force on 30 November 2011. The treaty generally applies from 30 November 2011. The protocol contains an exchange of information provision in line with article 26 of the OECD Model Convention.
Protocol to DTT Luxembourg-Mexico Entered into Force
The protocol, signed on 7 October 2009, in Luxembourg (published in Mémorial A – N° 51 of 6 April 2010) to the Luxembourg-Mexico income and capital tax treaty of 7 February 2001, entered into force on 20 November 2011. The treaty generally applies from 1 January 2012. The protocol contains an exchange of information provision in line with article 26 of the OECD Model Convention.
Protocol to DTT Luxembourg-Russia Signed
On 21 November 2011, Luxembourg and Russia signed in Moscow an amending protocol to the income and capital tax treaty of 28 June 1993 (published in Mémorial A – N° 68 of 23 August 1995). The protocol contains, among other provisions, an exchange of information provision in line with article 26 of the OECD Model Convention.
Tax Agreement with Jersey (Channel Islands) – Negotiations
According to the information published by the government of Jersey on 4 November 2011, negotiations for a tax agreement between Jersey and Luxembourg have reached an advanced stage.
Abolition of the Crisis Contribution
The crisis contribution has been abolished for tax year 2012 (for prior coverage, see Flash International Executive Alert 2011-189, 14 November 2011).
Updating of the Revaluation Factors
The “revaluation factors” of article 102 (6) of the Luxembourg Income Tax Law have been updated as of 1 January 2012. Such factors are used for example when selling real estate located in Luxembourg (not exempt as principal dwelling).
Continuation of Tax Relief for Hiring an Unemployed Person
The government has prolonged the tax incentive until 2014.2 The tax relief consists of an income tax credit when employing an unemployed person under the conditions foreseen by the law of 24 December 1996.
Source: KPMG