LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
A super‑reduced rate of 3% covers a wide range of goods and services, including broadcasting services, copyrights, most food products, books and peri - odicals, children’s clothing, water, pharmaceuticals, passenger transport, accommodation, and access to cultural, educational, sporting, entertainment events and e‑books. Finally, a zero rate applies principally to exports and intra‑Community (interstate) supplies of goods. Registration Duties In Luxembourg, registration duties vary depending on the type of transaction or document. Transfers of Luxembourg real estate generally trigger a registra - tion tax of 6% (increasing to 9% for certain proper - ties in Luxembourg City), plus a 1% transcription tax, calculated on the higher of the purchase price or the property’s fair market value. These taxes are deduct - ible for corporate income tax purposes. Certain corporate-law formalities – such as the incor - poration of a Luxembourg entity, amendments to its articles of association, or the transfer of its registered seat to Luxembourg – are subject to a fixed registra - tion duty of EUR75. When real estate is contributed to a company in exchange for shares, the contribution is subject to a proportional registration duty of 0.6% (or 0.9% for some Luxembourg City properties), plus a 0.5% transcription tax. If the consideration consists of something other than shares, the proportional duty increases to 6% (or 9% in Luxembourg City), and the transcription tax to 1%. Certain reorganisations may benefit from exemptions from proportional duties. Contributions of movable property remunerated by means other than shares are also subject to a pro - portional registration duty, with the applicable rate depending on the nature of the assets contributed. Top-Up Tax Under Pillar Two Luxembourg transposed the EU Pillar Two Directive on global minimum taxation in December 2023. As a result, Pillar Two is now in force, with the Income Inclu - sion Rule (IIR) and the Luxembourg Qualified Domes - tic Minimum Top‑Up Tax (QDMTT) applying for fiscal
years beginning on or after 31 December 2023, and the Undertaxed Profits Rule (UTPR) applying for fiscal years beginning on or after 31 December 2024. Luxembourg has been granted safe harbour status on the OECD’s central record. 5.3 Available Tax Credits/Incentives Luxembourg’s tax framework contains multiple incen - tives tailored to specific transaction types. Participation Exemption Under the participation exemption, dividends received from a foreign subsidiary can be exempt if the follow - ing conditions are met. • The distributing subsidiary must be: (a) an EU company covered by the Parent–Sub - sidiary Directive; or (b) a fully taxable Luxembourg company; or (c) a non‑resident joint stock company fully liable to a tax comparable to Luxembourg CIT (gen - erally at least 8% as of tax year 2025). • The Luxembourg parent company must be a fully taxable resident company (or qualifying PE). • The participation must satisfy a minimum threshold of: (a) at least 10% of the subsidiary’s share capital; or (b) acquisition cost of at least EUR1.2 million for dividend exemption. • Minimum holding period: the parent must hold or commit to hold the participation for at least 12 months. If these conditions are met, the dividend is fully exempt from Luxembourg corporate income tax. If dividends received by a Luxembourg company do not meet the conditions for the full participa - tion exemption, 50% of the dividend is neverthe - less exempt from CIT under Luxembourg’s domestic half‑income method, provided the income is paid by: • a fully taxable Luxembourg resident company; • a company resident in a state with which Luxem - bourg has concluded a double tax treaty and which
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