Business Environment

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In this page: Accounting Rules | Tax Rates | Intellectual Property | Legal Framework | Standards | Business Practices

 

Accounting Rules

Tax Year
The fiscal year begins on January 1st and ends on December 31 of the same year.
Accounting Standards
Starting on January 1, 2005, the EU ruling CE 1606/2002 imposes on all listed companies publishing their consolidated accounts a duty to establish their financial statements in I.A.S./I.F.R.S.
Accounting Regulation Bodies
The Accounting Regulatory Committee under the European Commission
International Accounting Standards Board
Accounting Reports
The general principles of Luxembourg accounting are:
- The principle of clarity and regularity ;
- The principle of fidelity ;
- The principle of continuity.

The annual accounts consist of:
- A balance sheet ;
- A profit and loss account ;
- An appendix.

The balance sheet and the profit and loss account must be established following the scheme determined by the 4th EU directive as they have been transposed into the law. In principle, the duration of an accounting year cannot exceed one year. The closing date of the accounting year must in principle agree with that of the fiscal year, being December 31. Annual accounts must be established in one of the country's three administrative languages (French, English, Luxembourger).

Publication Requirements
The publication obligations of a company vary according to its size. For more details consult the fourth directive (78/660/CEE) as modified by the directive 2003/38/CE.

Small companies can establish a balance sheet, a profit and loss account as well as an appendix in an abridged form. They are not obliged to present a management report, contrary to other companies. They can publish only the abridged balance sheet and an appendix.
Medium companies and large companies have to publish a balance sheet, a profit and loss account, an allocation of earnings proposal, the administrators and auditor's identity, an annual report and the report of the independent auditor. The management report must contain a faithful presentation of the evolution of the company's business and situation.

In addition to this, the EU directive of July 19, 2002 orders all listed European companies to establish, starting from the 2005 accounting year, their consolidated annual accounts based on the IAS/IFRS normas.

Professional Accountancy Bodies
OEC , The Luxembourg Order of Chartered Accountants
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.

KPMG, Ernst & Young, PricewaterhouseCoopers, Deloitte.

The Institute of Auditors of Companies (IRE)

Accounting News
IAS Plus

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Tax Rates

Consumption Taxes

Nature of the Tax
VAT (Value-Added Tax)
Tax Rate
17%
Reduced Tax Rate
A 3% rate applies to food for human consumption, excluding alcohol; agricultural products; books, newspapers and periodicals; shoes and clothes for children under age 14; sale of domestic accommodation; pharmaceutical products; restaurant services, excluding alcohol; water; transport of persons; admission to cultural events.
An 8% rate applies to the supply of gas and electricity, bikes, hairdressing, cleaning of private accommodation, plants and other floriculture products.
A 14% rate applies to wine of grapes with a concentration of alcohol up to 13 grades; solid mineral combustibles, mineral oil and wood used as fuel; advertising brochures and other prints; steam, heating and cooling; custody and management of securities; management of credits and credit guarantees by an entity other than the entity that granted the credit.
Some items are exempt from VAT, including: real estate transactions, supplies of postage and fiscal stamps at face value, services of doctors and dentists, finance, insurance, cultural and sporting services, welfare services, education.
Other Consumption Taxes
Excise duties are levied on certain products, notably on wine and spirit, tobacco, electricity, and mineral oils. More detailed information on excise duties is available on the European Commission website.

Learn more about Service Providers in Luxembourg on Globaltrade.net, the Directory for International Trade Service Providers.

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Corporate Taxes

Company Tax
Tax Rate For Foreign Companies
Resident entities are taxed on their worldwide income, whereas non-residents are only subject to tax on Luxembourg-source income.
Capital Gains Taxation
Capital gains and losses are treated as ordinary income and are subject to corporate tax. The taxation of gains on certain fixed assets could be deferred where the proceeds are used to acquire replacement items.
Capital gains from the sale of shares may be exempt from tax if the payee maintains or undertakes to maintain their participation, directly or indirectly, for an uninterrupted period of at least 12 months and that the participation does not fall below 10% or a purchase price of EUR 6 million during this period.
Main Allowable Deductions and Tax Credits
Depreciation of tangible and intangible assets is tax-deductible. Goodwill can be amortised over its useful life, or if it cannot be measured otherwise, the amortisation period is limited to ten years.
Start-up expenses can be charged directly to the profit and loss account of the year in which they are incurred, or amortised over a period of five years.
Interest charges are deductible as long as they are consistent with the arm's-length principle. Bad debts are generally deductible.
Donations to charitable organisations are deductible up to 20% of net income or EUR 1 million (the minimum amount being EUR 120). The excess amount of donation can be deducted over two years.
Compensation payments and severance pay are deductible up to EUR 300,000.
Fines and penalties are not deductible. Taxes, with the exception of corporation tax, municipal tax and wealth tax are generally deductible.
Tax losses incurred through the years ending on 31 December 2016 may be carried forward indefinitely. Losses incurred after this date may be carried forward up to 17 years. The carryback of losses is not permitted.
Payments to foreign subsidiaries (royalties, management fees, interest paid by a Luxembourg company to foreign subsidiaries) are deductible as long as they respect the arm's-length principle.
Other Corporate Taxes
Luxembourg resident companies and subsidiaries of foreign companies are subject to wealth tax. The rate is 0.5% for a taxable base up to EUR 500 million. For a taxable base exceeding EUR 500 million, companies are required to pay a lump-sum fee of EUR 2.5 million and 0.05% of the tax base in excess of EUR 500 million, without any limit. Companies with their head office or central office of administration in Luxembourg are subject to the minimum wealth tax (with amounts varying between EUR 535 and EUR 32,100 according to the total gross assets).
A subscription tax is levied on transferable securities (a registration fee that would give rise to the transfer of securities). The rate is 0.05% for mutual funds based on net assets at the end of the quarter. The rate is reduced to 0.01% for specialised investment funds and reserved alternative investment funds. Graduated rate reductions apply for funds that invest in "sustainable" investments.
Certain deeds (establishment, amendment of the articles of association, transfer of seat to Luxembourg) give rise to a lump-sum registration fee of EUR 75. A proportional fee is also payable if the deed involves a contribution of immovable property or a contribution of movable assets against payment.
The sale or transfer of real estate is subject to a registration fee of 7%. A municipal surcharge of 3% applies to real estate transfers in the City of Luxembourg.
The contribution of real estate in exchange for securities is subject to a registration fee of 1.1%. A municipal surcharge of 0.3% applies to real estate transfers in the City of Luxembourg.
An annual real estate tax is levied by municipalities at rates varying between 0.7% and 1% of the unitary value of the property (and is multiplied by a coefficient based on the type of property and municipality - the coefficient is 750% for commercial property in Luxembourg City).
As of 2021, a new Real Estate Levy ("prélèvement immobilier") applies to certain investment fund vehicles, at a rate of 20%.
The municipal business tax on income is levied at rates between 6% and 10.5%, depending on the municipality (calculated from the multiplication of the tax base by the municipal rate).
The rates of social security contributions paid by the employer vary between 12.12% and 14.61% and are capped at an annual ceiling of EUR 132,115.8 for 2021.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Country Comparison For Corporate Taxation

  Luxembourg OECD United States Germany
Number of Payments of Taxes per Year 23.0 10.1 10.6 9.0
Time Taken For Administrative Formalities (Hours) 55.0 163.6 175.0 218.0
Total Share of Taxes (% of Profit) 20.4 41.6 36.6 48.8

Source: Doing Business - Latest available data.

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Individual Taxes

Tax Rate

Individual tax rate Progressive rate from 0% to 42% (effective tax liabilities vary depending on the marital status of the taxpayer: single taxpayer, married our civil partners, single persons with children or senior citizens)
EUR 0 - 11,265 0%
EUR 11,265 - 13,137 8%
EUR 13,137 - 15,009 9%
EUR 15,009 - 16,881 10%
EUR 16,881 - 18,753 11%
EUR 18,753 - 20,652 12%
EUR 20,652 - 22,569 14%
EUR 22,569 - 24,513 16%
EUR 24,513 - 26,457 18%
EUR 26,457 - 28,401 20%
EUR 28,401 - 30,345 22%
EUR 30,345 - 32,289 24%
EUR 32,289 - 34,233 26%
EUR 34,233 - 36,177 28%
EUR 36,177 - 38,121 30%
EUR 38,121 - 40,065 32%
EUR 40,065 - 42,009 34%
EUR 42,009 - 43,953 36%
EUR 43,953- 45,897 38%
EUR 45,897- 100,002 39%
EUR 100,002 - 150,000 40%
EUR 150,000 - 200,004 41%
More than EUR 200,004 42%
Solidarity Surtax A solidarity tax of 7% of taxes (9% for single taxpayers earning more than EUR 150,000)
Allowable Deductions and Tax Credits
Subject to limitations, deductions are permitted for insurance premiums for life, accident, sickness (up to EUR 672 per person); individual pension schemes (up to EUR 1,200 per year); alimonies (up to EUR 24,000) and annuities; childcare, kindergarten and housekeeping cost; charitable contributions (up to the lower of EUR 1 million or 20% of taxable income); interest on personal and mortgage loans, etc. Commuting expenses can be deducted up to EUR 2,574 per year.
Each employee receives an annual flat-rate allowance of EUR 540 for expenses related directly to their job. If the business expenses exceed the annual flat-rate allowance of EUR 540, the employee may deduct the actual amount of his/her expenses.
Couples filing for joint tax declaration benefit from a lump-sum allowance of EUR 4,500 per year.
Special Expatriate Tax Regime
Non-residents are only taxed on their Luxembourg-source income. Non-residents can deduct only expenses related to income subject to Luxembourg taxation, and they may also deduct their social security contributions paid in Luxembourg and the lump-sum standard deduction of EUR 540 (there is an option to be treated as tax-resident when 90% of the individual's worldwide income is taxable in Luxembourg or when the total income earned outside the country is below EUR 13,000).

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of countries that have a tax agreement with Luxembourg.
Withholding Taxes
Dividends: 0 (paid to a qualifying company under the EU parent-subsidiary directive)/15%; Interest: 0%; Royalites: 0%
Bilateral Agreement
Luxembourg and Mauritius concluded a Double Taxation Agreement.

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Learn more about Taxes and Accounting in Luxembourg on Globaltrade.net, the Directory for International Trade Service Providers.

Intellectual Property

National Organisations
The body in charge of the protection of intellectual property in Luxembourg is the Service of the Intellectual property of the Ministry of the Economy.
Concerning industrial property, Luxembourg signed the Paris Convention. The Luxembourg Institute of Intellectual Property was founded in 2014.
Concerning trademarks, a single recording allows to protect these at the same time in Luxembourg, in Belgium and in the Netherlands.
International Membership
Signatory to the Paris Convention For the Protection of Intellectual Property
 

National Regulation and International Agreements

 
Type of property and law Validity International Agreements Signed
Patent
 
Patent Law on April 18, 2004
20 years Patent Cooperation Treaty (PCT)
Trademark
 
Uniform Benelux Trademark Law of December 2, 1992
10 years, indefinitely renewable for consecutive 10-year periods Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks
Design
 
Uniform Benelux Designs Law July 13, 1973 and Community Council ruling 6/2002 of December 12, 2001, on communitarian designs or models
Five years, renewable every five years during a period of 25 years maximum  
Copyright
 
Law of April 18, 2004
For the length of the author's life and 70 years after his death Berne convention For the Protection of Literary and Artistic Works
Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms
Rome ConventionFor the Protection of Performers, Producers of Phonograms and Broadcasting Organizations
WIPO Copyright Treaty
WIPO Performances and Phonograms Treaty
Industrial Models
 
Benelux Law of January 1, 1971
 

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Legal Framework

Independence of Justice
The judiciary in Luxembourg is independent, however its judges are appointed by the Grand Duke.
Equal Treatment of Nationals and Foreigners
Foreign nationals can expect an impartial trial from the country’s judicial system.
The Language of Justice
The judicial languages used in Luxembourg are French, German and Luxembourgian.
Recourse to an Interpreter
Luxembourg is a multilingual country accustomed to using German, French and English interpreters.
Sources of the Law and Legal Similarities
The main source of the law is the constitution of 1868 (revised several times). The country’s legal system is based on civil law system. Luxembourg accepts compulsory ICJ jurisdiction. Being member of the European Union, the country’s national law needs to comply with the conditions of the Community legislation.
Checking National Laws Online
The Luxembourg judicial portal
Judicial information of the Ministry of Justice

Learn more about Lawyers and Legal in Luxembourg on Globaltrade.net, the Directory for International Trade Service Providers.

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Standards

National Standards Organisations
ILNAS, The Luxembourg Institute for Normalization, Accreditation, Product Safety and Quality depends on the Ministry of Economy and external trade.
Integration in the International Standards Network

The body of standardization and certification is the The Luxembourg Institute for Normalization, Accreditation, Safety and Quality of Products and Services (ILNAS). Luxembourg is a member of the European Committee of Standardization (CEN), the European Committee of Electronic Standardization (CENELEC), the Standardization of Telecommunication (ETSI), the International Organization of Standardization (ISO) and the International Electrotechnics Commission .
Certain products, whatever their origin is, should be submitted to the technical rules which give rise to a ratification meeting EC standards.

Classification of Standards
Luxembourg upholds international standards (ISO, IEC), European standards (CE), and newly created national standards (ILNAS/OLN).
Online Consultation of Standards
A catalog of norms is available at the Luxembourger Standardization Body.
Certification Organisations
ILNAS The Luxembourg Institute for Normalization, Accreditation, Safety and Quality of Products and Services

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Business Practices

General Information
Passport to trade, Luxembourgian business culture
Expatica, Business culture in Luxembourg
Commisceo Global, Luxembourg Guide: Language, Culture, Customs and Etiquette
Opening Hours and Days
Businesses: from Monday to Friday from 8.30 AM to 12 AM and from 2 PM to 6 PM.

Banks: from Monday to Friday, from 8.30 AM to 4.30 PM and some of them are open on Saturday from 9 AM to 1 PM.

 

Public Holidays

New Year's Day January 1
Holy Friday March/April
May Day May 1
Ascension May
Whit Monday May/June
National Holiday June 23
Assumption August 15
All Saints Day November 1
Christmas Day December 25
Saint Stephen's Day December 26
 
 

Periods When Companies Usually Close

New Year's Day January 1
Holy Friday A weekend in March/April
Easter Monday A weekend in March/April
National Holiday June 23
Christmas holidays  December 25 and 26
 

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Latest Update: April 2022