LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
or branch – subject to certain exemptions and adjust - ments). The NWT rate is 0.5% on that part of the net wealth which is lower or equal to EUR500 million and 0.05% on that part of the net wealth exceeding EUR500 mil - lion. A reduction of the NWT can be requested by an entity in its CIT tax return, provided that it under - takes to enter, before the end of the following year, an amount equivalent to five times the reduction request - ed in a reserve account and to maintain this reserve in its balance sheet for a five-year period. Luxembourg companies are subject to the higher of either the NWT as per the unitary value or a minimum NWT varying between EUR535 and EUR4,815. Since 2025, the amount of minimum NWT is com - puted as follows: • a minimum NWT of EUR535 where the total bal - ance sheet is less than or equal to EUR350,000; • a minimum NWT of EUR1,605 where the total bal - ance sheet is greater than EUR350,000 and less than or equal to EUR2 million; or • a minimum NWT of EUR4,815 where the balance sheet total is greater than EUR2 million. Withholding Taxes As a general rule, Luxembourg does not levy with - holding tax on the following outbound amounts paid, credited or otherwise made available by Luxembourg corporate taxpayers to non‑residents: • ordinary interest paid at arm’s length; • royalties; • liquidation proceeds; and • dividend distributions made by exempt undertak - ings for collective investment. Dividends distributed by Luxembourg‑resident com - panies are, in principle, subject to a 15% withholding tax. However, subject to the General Anti‑Avoidance Rule (GAAR), a withholding tax exemption may apply where dividends are paid by a fully taxable Luxem - bourg resident company to:
• a non‑resident collective entity falling within the scope of the EU Parent–Subsidiary Directive; • a Swiss‑resident corporation subject to Swiss corporate tax and not benefiting from a Swiss tax exemption; • a corporation or co-operative resident in an EEA country (other than an EU member state) and fully subject to an income tax comparable to Luxem - bourg CIT; • a collective undertaking resident in a tax treaty jurisdiction and fully subject to an income tax com - parable to Luxembourg CIT; or • a Luxembourg permanent establishment of any of the above qualifying foreign entities. The exemption applies where the parent company has held or commits to hold – directly or indirectly through a tax‑transparent entity – at least 10% of the share capital or a participation with an acquisition cost of at least EUR1.2 million, for an uninterrupted period of at least 12 months. A 20% withholding tax applies to directors’ fees (increased to 25% if the tax is borne by the company paying the fees). For non‑resident directors whose Luxembourg‑source professional income consists solely of directors’ fees not exceeding EUR100,000 per fiscal year, the withholding tax constitutes the final tax, unless the director opts for assessment. A 10% withholding tax applies to income from inde - pendent literary or artistic activities and from profes - sional sports activities performed in Luxembourg. Value Added Taxes (VAT) In Luxembourg, VAT applies to supplies of goods and services, to intra‑Community acquisitions made by taxable persons in the course of their business, and to imports from outside the EU. The standard VAT rate is 17%. A taxable person is anyone who independently and regularly carries out an economic activity. Luxembourg also applies several reduced rates. An intermediate rate of 14% applies to items such as fuels, certain advertising publications, and services relating to the administration or custody of securities. A reduced rate of 8% applies to gas, electricity and, under certain conditions, works of art and their supply.
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