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Donald Trump’s re-election as US president has sparked widespread speculation about potential shifts in US trade and tax policies.
Countries in Asia are particularly concerned about the implications for regional trade, foreign investment, and tax agreements.
Let’s explore what this means for Asia and its economic future.
Trump’s presidency is expected to bring significant changes to U.S. economic policies, including:
Asian governments and businesses are taking steps to mitigate potential risks:
While challenges are inevitable, Trump’s re-election also presents opportunities.
For example, countries that can position themselves as alternatives to China for manufacturing may attract increased foreign investment.
Asia faces a mixed outlook as it prepares for potential policy shifts under Donald Trump’s presidency.
By focusing on diversification and regional cooperation, the region can navigate these challenges and capitalise on new opportunities.
If you have any queries about this article on US policy shifts, or tax matters in Asia, then please get in touch.
Alternatively, if you are a tax adviser in Asia and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
On November 5, former President Donald J. Trump was elected as the 47th President of the United States, with the Republican Party securing control of the Senate.
However, the political control of the House of Representatives remains uncertain and may take a few more days to resolve.
Despite the uncertainty, Republicans are optimistic about achieving a unified government, which could significantly influence tax policy and legislative outcomes.
Should Republicans gain control of both the House and Senate, this unified government would provide a pathway for President Trump’s tax proposals to advance.
Leveraging “budget reconciliation” procedures—similar to those used during the passage of the Tax Cuts and Jobs Act of 2017 (TCJA) and the Inflation Reduction Act of 2022 (IRA)—Republicans could bypass some procedural hurdles to enact tax changes with a simple majority.
However, these procedures are limited in scope and application, influencing the extent of legislative changes.
If Democrats retain control of the House, President Trump’s tax agenda would likely face significant opposition, necessitating bipartisan compromises.
Such a split government may hinder the resolution of crucial tax policy issues, including the looming expiration of TCJA provisions in 2025.
A partisan stalemate could delay decisions, impacting individuals, businesses, and the federal deficit.
While President Trump has not released a formal tax plan for his 2024 campaign, he has proposed several tax policy ideas that may shape his administration’s agenda. Below are key highlights:
President Trump has suggested reducing the corporate tax rate from 21% to 20%, with an additional reduction to 15% for domestic manufacturing through a revived domestic production activities deduction (DPAD).
While these measures aim to incentivize domestic production and boost mergers and acquisitions (M&A), his aggressive tariff policies could introduce supply chain risks, creating both opportunities and challenges for multinational corporations.
Certain Republicans advocate for repealing the corporate alternative minimum tax (CAMT) and the stock repurchase excise tax, as well as eliminating clean energy tax credits introduced under the IRA.
Although this could alleviate tax burdens for businesses, it may increase the federal deficit.
Additionally, the repeal could affect the supplemental funding provided to the Internal Revenue Service (IRS) for compliance, modernization, and customer service improvements.
President Trump has previously called for the elimination of carried interest deductions, although the TCJA only extended holding periods for long-term capital gains.
Whether this proposal will be revived remains uncertain, but it could serve as a funding source for other tax initiatives.
J.D. Vance has supported legislation to limit beneficial tax treatment of large corporate mergers, which could create tension with President Trump’s deregulation priorities.
These proposals may serve as bipartisan funding sources to offset other tax cuts.
President Trump has discussed reinstating 100% bonus depreciation, reversing the TCJA phase-out schedule.
Proposals to eliminate the amortization requirement for R&D expenditures under Section 174 and restore the EBITDA-based business interest deduction are also on the table.
Modifications to global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), and the base erosion anti-abuse tax (BEAT) are expected.
President Trump has also raised the possibility of withdrawing the U.S. from the OECD’s global tax framework, which could disrupt international tax planning and compliance but may enhance the U.S.’s appeal as an investment destination.
The administration aims to make individual TCJA provisions permanent while eliminating the $10,000 cap on state and local tax deductions.
Additionally, proposals to exempt Social Security payments, tips, and overtime income from federal taxation have been discussed.
The outcome of the 2024 elections and the composition of Congress will significantly influence the direction of U.S. tax policy over the coming years.
Whether through unified Republican control or bipartisan compromises, the potential changes will impact individuals, businesses, and international tax planning.
If you have any queries about this article on Trump Tax, or tax matters in the United States, then please get in touch.
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On 9 October 2024, Luxembourg’s government introduced its 2025 draft Budget law (number 8444) to the Luxembourg Parliament, referred to as the Draft Law.
This Budget aims to make Luxembourg’s economy more competitive, strengthen its financial centre, and improve the purchasing power of households.
In this article, we explore the key tax changes proposed in the Budget and what they mean for individuals and businesses.
The Luxembourg government proposes a reduction in the taxable base for registration and transcription duties on real estate transactions. This change is aimed at boosting the housing market. Here’s how it works:
To qualify for this reduction, the property must:
For those buying real estate between 1 October 2024 and when the Draft Law officially comes into force, a written request for a recalculation of duties must be submitted to the relevant authorities.
The reduction applies between 1 October 2024 and 30 June 2025.
In line with Luxembourg’s environmental goals, the Draft Law includes an increase of €24 to the CO₂ tax credit, bringing it to €192 starting from 1 January 2025.
This tax credit is designed to offset the impact of the CO₂ tax on individuals with low or moderate incomes, aligning with Luxembourg’s environmental commitment while supporting household finances.
The Draft Law also references additional measures initially proposed in draft law number 8414, dated 17 July 2024, which include:
These additional measures are designed to complement Luxembourg’s broader fiscal goals, aiming to foster economic growth and maintain Luxembourg’s competitive edge as a financial centre.
Luxembourg’s 2025 Budget brings forward several significant tax changes with the potential to benefit both the real estate market and individuals.
The reduction in real estate duties is expected to encourage housing investment, while the increased CO₂ tax credit aims to make environmentally friendly policies more affordable for lower- to middle-income residents.
Together with the personal and corporate income tax changes, these adjustments reflect Luxembourg’s commitment to economic resilience and sustainability.
If you have any queries about this article on Luxembourg’s 2025 Budget or tax matters in Luxembourg, then please get in touch.
Alternatively, if you are a tax adviser in Luxembourg and would be interested in sharing your knowledge and becoming a tax native, there is more information on membership here.
The UK Budget 2024 brought both relief and new challenges for pension savers, scheme trustees, and administrators.
While some feared changes to National Insurance on pension contributions and tax-free lump sums, these concerns were unfounded.
However, significant changes to inheritance tax (IHT) on pension-related death benefits are set to take effect from April 2027, prompting a closer look at the implications.
In yesterday’s Budget, there were a couple of reassuring announcements for pension savers:
However, while these aspects remain unchanged, new IHT rules will bring added complexity for scheme trustees and administrators in the coming years.
Starting immediately, the Budget extends the tax on transfers to overseas (QROPS) pension schemes, impacting those moving pensions outside the UK.
The Chancellor has introduced new measures to include more pension-related death benefits within IHT.
Previously, only unused defined contribution (DC) funds were anticipated to be affected, but now many other death benefit lump sums, including those from defined benefit (DB) schemes, will also be subject to IHT.
This aligns with the government’s aim to prioritize retirement income for the member and their spouse or civil partner, rather than for descendants.
To implement these changes, HMRC has launched a technical consultation on the practical application of IHT to pension death benefits, with draft legislation expected in 2025.
The government has also confirmed its commitment to incentivize pension saving, maintaining tax relief on contributions and investment growth.
The new IHT rules will come into force on 6 April 2027, applying the standard IHT rate of 40%.
From April 2027, the following death benefits from registered pension schemes will be included in a member’s estate for IHT purposes, unless they are left to a spouse, civil partner, or charity:
Currently, where trustees have discretion over lump sum death benefits, these funds typically fall outside IHT.
However, HMRC intends to end the different treatment of discretionary versus non-discretionary death benefits.
Starting from 6 April 202, pension scheme administrators will be responsible for reporting and paying IHT on unused pension funds and death benefits.
This shift means that:
The collaboration between PRs and pension administrators will involve
When a spouse or civil partner is the beneficiary, the exemption from IHT applies. However, if trustees need time to assess beneficiaries, meeting the two-month reporting deadline may prove difficult.
IHT payments must be reported and paid within six months of the month of the member’s death.
From April 2027, pension administrators will face this same deadline, with interest charges for late payments.
After 12 months, the member’s beneficiaries will share liability with administrators for any outstanding IHT on pension funds.
HMRC expects only about 10% of estates to exceed the IHT threshold, currently set at £325,000 (with a potential extra £175,000 if a home is left to direct descendants).
Pension administrators are required to report IHT information only when payable on unused funds or lump sum death benefits.
HMRC clarified that IHT changes won’t apply to certain life policy products purchased with or alongside pensions as part of an employer package.
Further consultations may address specific exclusions for excepted life assurance and unregistered top-up pensions.
While aspects of the Budget 2024 bring relief for pension contributors, new IHT rules on death benefits from 2027 introduce additional obligations for pension schemes and PRs.
This development could significantly impact estate planning for pension holders.
If you have any queries or comments about this article on tax changes for pensions in UK Budget 2024 then please get in touch.
Brazil is on the verge of passing a major tax reform bill that could dramatically change how taxes are collected in the country.
This reform is aimed at simplifying the tax system, which is currently one of the most complicated in the world.
For businesses, both local and international, this could mean a reduction in compliance costs and a clearer understanding of how taxes will be applied.
Let’s explore what this tax reform involves and how it could impact businesses.
The Brazilian tax system is notorious for its complexity.
It involves multiple layers of taxes, including federal, state, and municipal taxes, which often overlap and create confusion for businesses.
The new tax reform bill aims to simplify this system by consolidating various taxes into one or two main taxes.
This would make it easier for businesses to comply with tax laws and reduce the administrative burden.
The main feature of the reform is the creation of a new Value Added Tax (VAT), which would replace several existing taxes.
The idea is to move towards a system that taxes consumption more fairly and reduces the burden on businesses that have been struggling to keep up with Brazil’s current tax requirements.
Brazil’s current tax system has long been a problem for businesses.
It’s not just the high tax rates that are an issue; it’s the complexity of the system. Companies spend a lot of time and money trying to figure out how much tax they owe and where they need to pay it.
In fact, a recent study showed that Brazilian companies spend more time on tax compliance than businesses in almost any other country.
By simplifying the tax system, the Brazilian government hopes to make the country a more attractive place for foreign investment.
Reducing the complexity of the system will lower compliance costs for businesses and help them focus more on growth and innovation.
The most significant change in the reform is the introduction of a single VAT that would replace several different taxes, including the PIS/COFINS (federal taxes) and the ICMS (a state-level tax on goods and services).
This would make it easier for businesses to comply with tax laws because they would only need to deal with one set of rules for consumption taxes, instead of the many overlapping rules they currently face.
Another key change is the introduction of a simplified income tax system for small and medium-sized enterprises (SMEs).
The goal here is to encourage growth among smaller businesses by reducing their tax burden and making it easier for them to comply with the law.
For businesses, especially large multinationals, this reform could lead to lower compliance costs and more clarity when it comes to tax obligations.
Instead of dealing with multiple tax authorities, businesses will be able to focus on a simplified system with fewer opportunities for confusion and errors.
However, some industries may face higher taxes, particularly in sectors that currently benefit from lower state-level taxes under the current system.
The reform is designed to create a more level playing field, so some businesses may end up paying more in taxes, while others may see their tax burden reduced.
Brazil’s tax reform bill is a long-awaited step towards simplifying one of the world’s most complicated tax systems.
For businesses, this reform promises to lower compliance costs and make it easier to understand and comply with tax laws.
While the changes will take some time to implement, they represent a significant move towards a more efficient and business-friendly tax system in Brazil.
If you have any queries about this article on Brazil’s tax reform, or tax matters in Brazil, then please get in touch.
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Argentina has recently made a significant move by cutting its withholding taxes on international investments.
This decision is part of the country’s broader strategy to attract more foreign investment during challenging economic times.
By lowering the taxes that foreign investors have to pay, Argentina hopes to make itself a more attractive place to do business.
In this article, we’ll explore what withholding taxes are, why Argentina is cutting them, and what this could mean for businesses and investors.
Withholding taxes are taxes that are deducted from payments made to foreign investors.
When an investor from another country earns income in Argentina—whether it’s through interest, dividends, or capital gains—the Argentine government takes a percentage of that income in the form of withholding tax.
These taxes are a way for governments to ensure that they collect revenue from foreign investors, even if those investors don’t live in the country.
The amount of withholding tax varies from country to country, and different types of income (such as dividends or interest) may be taxed at different rates.
Argentina is going through a period of economic uncertainty, with high inflation and challenges in the local economy.
To help boost the economy, the government has decided to reduce the amount of tax it collects from foreign investors.
By cutting withholding taxes, Argentina hopes to make itself more attractive to international businesses and investors.
The idea is that by lowering the tax burden on foreign investors, more companies and individuals will be willing to invest their money in Argentina.
This, in turn, could help stimulate economic growth and create new jobs.
Argentina hasn’t announced the exact percentage for the tax cuts yet, but it is expected to be a significant reduction.
The goal is to bring the country’s tax rates more in line with other countries in the region that have lower withholding taxes, such as Chile and Uruguay.
This would make Argentina more competitive as a destination for international investment.
For investors, this is good news. Lower withholding taxes mean that foreign investors will get to keep more of the money they earn in Argentina.
This could make investing in Argentine businesses more appealing, particularly in sectors like agriculture, energy, and manufacturing.
However, it’s important to note that Argentina’s economy is still facing significant challenges.
While lower taxes might attract more investment, the overall economic situation is still a concern for many potential investors.
Argentina’s decision to cut withholding taxes is a bold move aimed at boosting foreign investment.
By reducing the amount of tax collected from international investors, the government hopes to attract more businesses and individuals to invest in the country.
While the success of this strategy remains to be seen, it might be a step in the right direction for Argentina’s economy.
If you have any queries about this article on withholding taxes in Argentina, or tax matters in Argentina, then please get in touch.
Alternatively, if you are a tax adviser in Argentina and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
Germany is known for having one of the most robust economies in Europe, but it also has a reputation for relatively high corporate taxes.
To remain competitive and attract more international investment, Germany has proposed new corporate tax reforms.
These reforms are designed to lower the tax burden on businesses, promote innovation, and make the country more attractive to foreign investors.
Germany’s new corporate tax proposals are aimed at both large and small businesses. Here are the key changes:
Germany is already a top destination for foreign investment, but the country wants to remain competitive as other nations cut their corporate tax rates.
For example, the United States and the United Kingdom have both taken steps to lower corporate taxes to attract more business.
By lowering its tax rates and offering incentives for innovation, Germany hopes to encourage multinational companies to invest in the country.
This will create more jobs, improve the country’s technological capabilities, and boost the economy overall.
While the tax cuts are popular with many businesses, there has been some criticism of the proposals.
Critics argue that lowering corporate taxes could lead to a reduction in government revenue, which may impact public services like healthcare and education.
Additionally, there are concerns about whether the tax cuts will disproportionately benefit large corporations while smaller businesses may not see as much of a reduction in their tax bills.
Germany’s new corporate tax proposals are part of a broader strategy to make the country more competitive in a global market.
By lowering the corporate tax rate, offering more incentives for R&D, and simplifying tax compliance, the German government hopes to attract more foreign investment and boost the country’s economy.
For foreign investors and multinational companies, these changes represent an exciting opportunity to invest in a country known for its economic stability and innovation. However, businesses should stay informed as the specific details of the reforms are finalised.
If you have any queries regarding Germany’s Latest Corporate Tax Proposals, or German tax matters in general, then please get in touch.
As the 2024 general election approaches, tax policy has become a key issue that voters and lawmakers are closely watching.
With both major presidential candidates offering distinct proposals and control of Congress up for grabs, the outcome of the election will have significant ramifications for the future of tax legislation in the United States.
This pre-election analysis delves into the key tax policy proposals from former President Donald Trump and Vice President Kamala Harris, and what we might expect from key congressional leaders on tax policy in the 119th Congress.
The Tax Cuts and Jobs Act (TCJA) of 2017 brought substantial changes to the US tax code, but many of its provisions are set to expire at the end of 2025.
These expiring provisions include tax cuts for individuals, lower tax rates, and an expanded child tax credit.
For businesses, changes will affect the expensing of investments and the 20% deduction for certain business income, although the 21% flat corporate tax rate will remain in place.
If Congress does not extend or make these provisions permanent, taxpayers could face higher rates and reduced benefits.
The direction of these discussions will largely depend on the outcome of the November election, with potential scenarios ranging from extending the TCJA’s provisions to completely reversing them.
Vice President Kamala Harris has made tax policy a central theme of her campaign. Building on the Biden-Harris administration’s work, particularly the Inflation Reduction Act (IRA) of 2022, Harris is expected to focus on tax credits that promote energy efficiency and green initiatives.
The IRA includes tax credits for clean energy investments, energy-efficient improvements, and electric vehicles.
These incentives are designed to drive innovation and support sustainable economic growth.
Additionally, Harris has proposed significant changes aimed at reducing economic inequality, such as increasing taxes on corporations and high-income earners, expanding the Child Tax Credit, and introducing tax incentives for affordable housing.
Harris’s approach to tax policy is expected to be in line with the Biden administration’s strategies, with some nuanced differences.
She has already outlined plans to raise taxes on those earning over $400,000 annually and to close corporate tax loopholes.
Harris has also proposed using tax incentives to combat climate change and support the construction of affordable housing.
Her administration would likely continue to push for a tax system that supports working families, reduces inequality, and advances sustainability.
During his first term, Donald Trump championed the TCJA, which lowered both individual and corporate tax rates.
In his bid for a second term, Trump has proposed further reducing taxes, particularly for high-income earners and businesses, to stimulate economic growth.
His proposals include extending the tax cuts from the TCJA, lowering the corporate tax rate, eliminating the estate tax, and reversing certain aspects of the Inflation Reduction Act, such as the corporate alternative minimum tax. T
rump’s tax policy priorities focus on reducing tax burdens, fostering investment, and encouraging economic expansion.
If Trump returns to the White House, we can expect an aggressive push to weaken some of the tax provisions introduced under the Biden administration, particularly those related to green energy.
Trump may also seek to leverage the Treasury Department and the IRS to implement changes without needing new legislation, especially if Congress does not support his efforts.
Despite the stark differences in tax policy approaches, there are areas where bipartisan collaboration is possible.
Expanding tax credits like the Child Tax Credit and Earned Income Tax Credit could provide common ground for both parties.
Addressing the expiring provisions of the TCJA might also lead to discussions on extending or modifying these cuts, particularly for middle-income earners.
Additionally, improving infrastructure investment through tax incentives could garner support from both sides of the aisle.
In the current Congress, there have been instances of bipartisan efforts, such as the introduction of the Tax Relief for American Families and Workers Act, which aims to provide tax relief to working families and stimulate economic activity.
Similar initiatives may continue in the 119th Congress, offering opportunities for collaboration on tax policy.
As the 2024 election looms, the future of US tax policy is a critical issue with wide-reaching implications.
The proposals from the presidential candidates and the leadership priorities of key congressional figures highlight a deep divide in approaches but also point to potential areas for bipartisan cooperation.
With key provisions of the TCJA set to expire and ongoing debates about economic fairness and growth, the election outcome will significantly shape the tax policy landscape for years to come.
If you have any queries on this article, US Election and Tax, or US tax matters in general, then please get in touch.
On 12 August 2024, the Canadian federal government unveiled several packages of draft legislation aimed at implementing various tax measures, refining previously released draft laws, and introducing technical amendments (collectively referred to as the “August 12 Proposals”).
These proposals build upon the tax measures introduced in the 2024 Federal Budget (Budget 2024) and include updates to earlier draft legislation.
The Canadian government has invited the public to provide feedback on most of these measures by 11 September 2024, with an earlier deadline of 3 September 2024 for comments on the capital gains inclusion rate and lifetime capital gains exemption amendments.
The August 12 Proposals encompass a broad range of tax measures, many of which are discussed in this update. Tax changes related to green economy initiatives will be covered in a separate update.
Budget 2024 proposed increasing the capital gains inclusion rate for corporations and trusts from 50% to 66.67%, with a similar increase for individuals on capital gains exceeding $250,000 in a taxation year, net of certain deductions.
On 11 June 2024, the House of Commons approved a Notice of Ways and Means Motion (NWMM) to amend the Income Tax Act (ITA) and implement this proposed increase.
The August 12 Proposals include revisions to the NWMM amendments, and the Department of Finance has provided explanatory notes for these changes.
The impact of the increased capital gains inclusion rate on the calculation of the capital dividend account (CDA) is also addressed, ensuring that taxpayers have clear guidance during transitional periods.
The CDA is a notional account that tracks the non-taxable portion of capital gains and losses realized by private corporations, allowing for tax-free distributions to Canadian-resident shareholders.
The proposed increase in the capital gains inclusion rate necessitates adjustments to CDA calculations.
For taxation years that straddle the implementation date (25 June 2024), the August 12 Proposals introduce a “blended” inclusion rate to reflect the timing of dispositions within the transitional year.
This blended rate, while necessary for overall tax calculations, created challenges for CDA assessments, as the exact inclusion rate could not be determined until the year-end. The August 12 Proposals resolve this issue by establishing specific rules for calculating CDA during transitional years.
The hybrid surplus rules, which relate to dividends received by Canadian corporations from their foreign affiliates, are also revised.
The August 12 Proposals introduce separate surplus pools for “legacy hybrid surplus” (pre-25 June 2024) and “successor hybrid surplus” (post-24 June 2024).
These distinctions ensure that the treatment of hybrid surplus dividends aligns with the relevant capital gains inclusion rate at the time of the underlying transactions.
Amendments to the Global Minimum Tax Act (GMTA), enacted on 20 June 2024, are included in the August 12 Proposals.
These changes implement the undertaxed profits rule (UTPR), provide transitional safe harbours, and address other elements from the OECD’s latest guidance.
The amendments will apply to fiscal years of qualifying multinational enterprise (MNE) groups beginning on or after 31 December 2024.
The trust reporting requirements are updated to reduce the number of bare trusts affected. The August 12 Proposals introduce new exemptions and modify existing ones, making the rules clearer and less burdensome for taxpayers.
The revised rules will apply to taxation years ending after 30 December 2025, with the Canada Revenue Agency (CRA) having already suspended the 2023 reporting obligations.
The August 12 Proposals address concerns raised about the anti-deferral rules targeting Canadian-controlled private corporations (CCPCs) and their controlled foreign affiliates (CFAs).
The revised measures introduce a carve-out for “foreign accrual business income” (FABI), offering some relief to CCPCs engaged in legitimate business activities abroad.
However, the proposals remain complex and may still impose significant compliance burdens on affected companies.
The excessive interest and financing expenses limitation (EIFEL) rules are amended to include exemptions for certain interest and financing expenses related to regulated energy utilities and purpose-built residential rentals.
These exemptions aim to provide relief to businesses in specific sectors, supporting their continued growth and investment.
The August 12 Proposals also clarify the application of hybrid mismatch rules to foreign affiliates, ensuring that the rules are applied consistently and preventing instances of double taxation on inter-affiliate dividends.
The CEI, introduced in Budget 2024, is further detailed in the August 12 Proposals.
This incentive reduces the capital gains inclusion rate to one-third for qualifying entrepreneurs, with several conditions relaxed compared to the original proposal.
The CEI aims to support business owners by providing substantial tax relief on the sale of their businesses.
The August 12 Proposals represent a comprehensive update to Canada’s tax laws, addressing a range of issues from capital gains to international tax compliance.
While these changes introduce some relief and clarity, they also add layers of complexity, particularly for businesses with international operations.
As the consultation period progresses, further refinements may be made to ensure that the legislation effectively meets its objectives without imposing undue burdens on taxpayers.
If you have any queries about this article on Canada government releases significant draft tax legislation, or tax matters in general, then please get in touch.
On 17 July 2024, the Luxembourg government unveiled a new bill proposing a range of tax cuts aimed at benefiting both corporations and individuals.
This legislative move aligns with the current government’s commitments for the 2023-2028 period, promising substantial fiscal relief and various other economic benefits.
Starting from the fiscal year 2025, the corporate income tax rate will decrease by one percentage point, bringing it down to 16%.
For income up to €175,000, the reduced rate will be adjusted from 15% to 14%.
This adjustment will see the consolidated corporate tax rate in Luxembourg City (inclusive of the solidarity surcharge and municipal business tax) fall from 24.94% to 23.87%.
Private wealth management companies, known as “société de gestion de patrimoine familiale” (SPF), will see an increase in the minimum annual subscription tax from €100 to €1,000.
Additionally, the determination of the debt portion for the subscription tax base will now be based on the balance sheet at the beginning of the fiscal year rather than January 1st.
Moreover, the government aims to clarify the procedure for withdrawing SPF status in cases of legal non-compliance. Severe breaches can lead to fines up to €250,000 and potential withdrawal of SPF status by the director of the indirect tax authorities (AED) if not remedied within six months. These changes will take effect for breaches occurring after the law’s enactment.
The bill also includes a provision to exempt actively managed exchange-traded undertakings for collective investment in transferable securities (actively managed UCITS – ETF) from the subscription tax.
To bolster Luxembourg’s attractiveness to talent, the government plans to amend the profit-sharing bonus (“prime participative”).
The tax-exempt portion of this bonus will increase from 25% to 30% of annual remuneration, and the total distributable amount will rise from 5% to 7.5% of employer profits.
The tax regime for impatriates will be modernized, introducing a 50% tax exemption on annual gross remuneration up to €400,000, replacing the existing regime that primarily offers tax benefits on certain benefits in kind and impatriation bonuses.
Additionally, a new “young employee bonus” will provide a sliding-scale tax exemption for employees under 30 with annual gross salaries up to €100,000. The bonus, capped at €5,000, will be available only with the first employer and for up to five years.
Starting in fiscal year 2025, the income tax scale will be adjusted to reflect recent inflation and indexed salary increases, significantly reducing the tax burden on individual taxpayers.
Tax credits for single parents will be increased, and a new overtime tax credit (CIHS) will be introduced for employees paid for overtime, excluding civil servants.
This measure aims to resolve tax issues for German cross-border workers who are taxable on overtime earnings in Germany.
Additionally, the maximum allowance for dependent children not living in the household will be raised.
Luxembourg’s proposed tax cuts represent a significant shift in the fiscal landscape, promising substantial benefits for both corporations and individuals.
By reducing corporate income taxes, reforming the tax regime for private wealth management companies, and introducing new tax relief measures for individuals, Luxembourg is positioning itself as an attractive destination for businesses and talent alike.
These changes, aligned with the government’s long-term commitments, are set to take effect from 2025, offering broad-based economic relief and fostering a more competitive and inclusive economic environment.
If you have any further queries about this article on Tax Cuts for Corporations and Individuals in Luxembourg, or other tax issues in Luxembourg, then please get in touch.