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In Employment

Luxembourg: Incentive scheme for hiring highly skilled employees – an update of the regime

by , , , , and 8 Mins Read

On 14 October 2020, Luxembourg announced new provisions with respect to incentive for highly skilled and qualified workers (“Impatriate Regime”) as part of the 2021 budget bill (“Law”).1

The Impatriate Regime was introduced back in 20112 and was further amended by several circulars, including the most recent Circular LIR No. 95/2 dated 27 January 2014 (“Circular”) which have been repealed in the meantime. The government has now decided to codify the Impatriate Regime under Article 115(13) b. of the Luxembourg income tax law (LITL) and to introduce some limited changes.

The aim of Article 115(13) b. of the LITL remains close to the original objective of the Circular, which was to further enhance the competitiveness of Luxembourg by enabling Luxembourg employers to hire new talent from abroad. The changes introduced by the Law should further simplify the procedure, strengthening the clear intention of Luxembourg to remain attractive from an economic perspective.

Below we describe the regime that will be applicable as from 1 January 2021 while highlighting the main changes compared to the former rules.

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In Europe

Luxembourg: Mandatory disclosure rules (DAC6) – A look at private equity investment in Luxembourg

by and 1 Min Read

On May 25 2018, the Council of the European Union adopted a directive concerning the mandatory automatic exchange of information in the field of taxation, in relation to reportable cross-border arrangements (Council Directive (EU) 2018/822).  This EU mandatory disclosure regime, known as the DAC6 Directive, aims to increase transparency by requiring intermediaries and, in certain circumstances, taxpayers, to report cross-border transactions that are deemed to represent aggressive tax planning.

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In Europe

Luxembourg tax unity regime breaches EU freedom of establishment

by , and 8 Mins Read

On 14 May 2020, the European Court of Justice (ECJ) issued its decision on case (C-749/18) further to a request for a preliminary ruling by the Luxembourg Administrative Court on 30 November 2018. The ECJ ruled that the strict distinction made by the Luxembourg tax authorities between the vertical and horizontal tax unity regime is contrary to the freedom of establishment set forth in articles 49 and 54 of the Treaty on the Functioning of the European Union (TFEU).

As a result, an EU non-integrating parent entity (i.e., share capital company or permanent establishment) should be able to combine horizontal and vertical tax unity without terminating the pre-existing fiscal unity nor triggering any negative tax consequences resulting from such a termination. Indeed, under Luxembourg current tax consolidation rule, the end of tax unity group before the end of the five years minimum period entails a retroactive tax assessment of each entity on a stand-alone basis.

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In Europe

Luxembourg: Mandatory Disclosures on Cross-Border Arrangements: Are You Ready?

by , , and 8 Mins Read

On Saturday 21 March 2020, the Luxembourg Parliament passed the law implementing the Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (the DAC 6 Law). The DAC 6 Law…

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