The End of the Year approaching quickly, our Luxembourg tax experts have gathered 7 important topics to optimize your Luxembourg income tax situation.
1. Pay out funds before year end
Funds, unless financed by debt, create a higher net wealth tax burden. As such ensure that funds not needed in your Luxembourg company are transferred to a non-Luxembourg entity, for instance via dividends or loan redemptions or reinvestments into net wealth tax exempt stakes in subsidiaries.
2. Choose for losses to be accounted for this year rather than next year
Given the Luxembourg tax reform is approved, losses created in 2017 have a limited carry forward of 17 years. Conversely, losses created this year can be carried forward indefinitely. So where there is a grey area and you are thinking of whether to book the losses this year or next year, tax wise it is better to account for them this year.
3. Choose for taxable profits to be accounted for next year rather than this year
For profits the situation is the opposite: given the Luxembourg tax reform is approved, profits will be taxed at a lower rate in 2017 compared to the 2016 tax rate. So for grey areas where profits can be booked in either 2016 or 2017, consider going for 2017 from a tax perspective.
4. Choose for certain acquisitions to be done next year
According to Luxembourg tax law, certain newly acquired goods can benefit from an income tax incentive (bonification d’ impôts). Given the Luxembourg tax reform is approved, this tax incentive is to be increased in 2017. So you might consider waiting with your investment until next year.
5. Pay out interest to Luxembourg resident individuals this year
When there is a choice of making an actual interest payment to a Luxembourg resident individual this year or next year, go for this year: The tax rate will be 10% instead of 20% (given the Luxembourg tax reform being approved).
6. Bring your tax affairs in order this year
Where you have not submitted your tax return yet, do it this year as the enforcement penalty will increase considerably up to EUR 25,000.
Where you already submitted tax returns which have been assessed but where you notice that you made a mistake benefit from the possibility to escape potential prosecution: Declare the taxes properly, pay the outstanding taxes and pay a surcharge. You can still do this in 2017, but the surcharge will be higher (25% on outstanding taxes rather than 10%). We can assist you avoiding an incomplete or wrong declaration.
7. Register debt instruments next year
You want to voluntarily register your debt instrument with the Administration de l’Enregistrement? Then wait until next year, because the 0.24% stamp duty has been abolished.