Luxembourg

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

Companies (capital societies only) are subject to the Communities income tax, IRC, applying on profits (distributed or not):
- 20% for an income lower than 10,000 EUR;
- 2,000 EUR + 26% of the income contained between 10,000 EUR and 15,000 EUR;
- 22% of the income beyond 15,000 EUR.
In addition, a surcharge of 4% is payable to the unemployment fund. A municipal business tax is also levied; the rate averages 7.5%.
The Municipal commercial Tax (ICC)
applies to commercial, industrial, mining and craft entities established in the Grand-Duchy of Luxembourg. The rate of the ICC is 3%.

   
Tax rate on long-term capital gains Capital gains and losses are generally treated as ordinary trading income and expense, subject to normal corporate tax. But some exceptions exist.
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies Dividends paid to residents or non-residents are subject to a tax rate of 20% (0% in case of international agreements) held at source.
   
Tax rate on branches Branches are taxed as Luxembourgian companies are.




Income tax

Fiscal year The fiscal year begins on January 1st and ends on December 31 of the same year.
   
Income tax rate There are 17 income brackets, which the rate varies from 0% to 38%. The implement of the rates depends on the class of which the taxpayer belongs (married couple, with or without children, widower or widow, etc.).
   



VAT rates

Standard rates 15%
   
Reduced rates The reduced rates are the following: 3%, 6%, 12%.
The 3% rate applies to food, books and newspapers, pharmaceuticals, water, agricultural produce and some other items. The 6% rate applies to gas and electricity. The 12% rate applies to intellectual services, oils, wine and some other items.
Exports are zero-rated.
Some financial, health and medical services and leasing of immovable property are exempted of VAT.



Other important taxes


Name of tax
Rate
Individuals Wealth tax  
0,50%  
Insurance tax  
4%  
Land tax  
various from 0.7% to 1%  


 

Accounting

Introduction
Establishing accounts depends on the size of companies, and referring to three criteria : total of the balance sheet (total of assets without losses of the accounting year), the net amount of the turnover (net, such as it appears on the profit and loss account) and the average number of the workforce.


General accounting principles
BALANCE SHEET
A. Subscribed capital unpaid
B. Start-up costs
C. Fixed assets
C.I. Immaterial immobilizations
C.II. Physical immobilizations
C.III. Immobilization.

Obligations and publications
The deposit of documents which have to be published is made to the Clerk's Office of courts, for the publishing to the Special Collection of Companies and Associations. The deposit must intervene within the month of the annual accounts' approval by the shareholders or associates.
Companies have to publish a balance sheet, a profit and loss account, an affectation of results proposal, the administrators and auditor's identity, an annual report and the report of the independent auditor.

Certification and auditing
The control of medium and big companies must be made by one or several independent auditors of companies, appointed by the general assembly among the members of the Institute of Independent Auditors of Companies.
The control of small companies must be made by an accountant appointed by the general assembly for definite duration.
The conclusion of the independent auditor's report can be:
- A certificate without reserve, that is to say an approval
- A certificate with reserves, that is to say that there is approval with reserves because of discords or doubts.
- A refusal to give a certificate.

Professionals and representative organizations
The accountants' associations have difficulties to get organized because of the importance of the State in the accounting system.



Useful links
The Mininstry of Finances
The Tax Office
The Customs Office

Last modified in January 2007
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