Tag Archive: wealth tax

1. Luxembourg Wealth Tax Revised and Simplified (and other changes)

   30 May 2024 5:10 pm Leave a Comment

   Luxembourg Wealth Tax – Introduction

   On 23 May 2024, the Luxembourg government introduced a bill of law and a draft of Grand Ducal regulation to address several key tax issues.

   These proposals aim to:

   1. Amend the minimum net wealth tax rules to comply with a Constitutional Court decision;
   2. Clarify the tax treatment of share class redemptions following recent court judgments
   3. Provide taxpayers the option to waive the participation exemption regime under specific conditions.

   Once enacted, these changes will enhance legal certainty for a wide range of taxpayers.

   Background

   The Luxembourg government aims to address specific case law developments and increase legal certainty with these legislative amendments.

   Minimum Net Wealth Tax (NWT)

   Effective 1 January 2025, the minimum NWT rules will be amended to align with the Constitutional Court ruling 185/23 from 10 November 2023.

   The current two-tier NWT system will be replaced with a single system based on the taxpayer’s balance sheet total:

   • Taxpayers with a balance sheet not exceeding EUR 350,000 will be liable for a minimum NWT of EUR 535.
   • For balance sheets between EUR 350,000 and EUR 2,000,000, the minimum NWT will be reduced to EUR 1,605 from the current EUR 4,815.
   • Taxpayers with balance sheets exceeding EUR 2,000,000 will face a maximum NWT of EUR 4,815, down from the previous maximum of EUR 32,100.

   Other measures

   Clarification on Share Class Redemptions

   In response to 2023 court rulings, the bill clarifies that redeeming an entire class of shares qualifies as partial liquidation under article 101 of the income tax law if the following conditions are met:

   • The share class is canceled within six months of repurchase.
   • Share classes were established at incorporation or during a capital increase.
   • Each share class has distinct economic rights, as defined in the articles of association.
   • The redemption price reflects the fair market value at the redemption date and is determined based on the articles of association.

   Additionally, if the redeemed share class is held by an individual with significant participation, their identity must be reported in the annual tax return.

   Waiving Tax Exemption on Dividends and Capital Gains

   Taxpayers will have the option to waive the 50% dividend exemption and full participation exemption on dividends and capital gains if specific conditions are met.

   This change aims to reduce mismatches between Luxembourg and other jurisdictions’ participation exemption regimes and to help taxpayers manage tax loss carryforwards effectively.

   The waiver must be made annually and separately for each participation, starting from the tax year 2025.

   Electronic Filing of Withholding Tax Returns

   From 1 January 2025, Luxembourg will mandate electronic filing for withholding tax returns on directors’ fees and wage withholding tax, streamlining tax compliance and assessment procedures.

   Conclusion

   The bill will be debated in Parliament and may be amended before the expected vote later in 2024.

   Final thoughts

   For further information on Luxembourg Wealth Tax, or Luxembourg taxes more generally, then please get in touch.

2. Spanish Net Wealth Tax & Solidarity Wealth Tax for non-Spanish residents

   1 December 2022 2:34 am Leave a Comment

   Introduction

   Several weeks ago, we commented on the Spanish Government’s recently proposal to introduce a Solidarity Wealth Tax.

   However, this article considers new wealth tax proposals – in respect of the Net Wealth Tax and the Solidarity Wealth Tax – for non-Spanish-tax-resident individuals who hold Spanish real estate through one or multiple non-Spanish-resident entities.

   What is the proposal?

   It is envisaged that non-Spanish-tax-resident individuals would be subject to the Net Wealth Tax (“NWT”) when they hold shares in an unlisted entity. This would be where “at least 50% of its assets are directly or indirectly made up of real estate located in Spain”.

   These new proposals would replace the current domestic provisions which historically have required non-resident individuals to pay NWT in circumstances where they directly own real estate only.

   Additionally, the Spanish Government plans to bring in the Solidarity Tax (“ST”) to supplement the regional NWT. The ST will be calculated and assessed at the federal level.

   The ST will be levied on non-Spanish-tax-resident individuals with a net wealth in Spain of at least EUR 3 million. It should be noted that this will include any interests in non-resident entities that own Spanish real estate

   The NWT can be credited against any ST liability.

   Commencement of new Spanish Net Wealth Tax and Solidarity Wealth Tax

   It is expected that these measures will be passed before the end of 2022.

   If the new legislation is published prior to the end of 2022, then both would apply to indirect holdings of Spanish real estate held on 31 December 2022.

   It is currently expected that both would have to be paid in June or July of the following year.

   If you have any queries about the Spanish Net Wealth Tax or Solidarity Wealth Tax, or Spanish tax matters in general, then please do get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

3. New Solidarity Wealth Tax for high net worth individuals

   13 September 2022 4:34 pm Leave a Comment

   Background

   At the end of September, Spain announced a package of new measures to be included in the General State Budget Bill for 2023.

   One such measure was the Solidarity Wealth Tax.

   “Solidarity” Wealth Tax

   This will be a temporary tax and will apply for 2023 and 2024 at the end of which it’s success will be reviewed.

   The tax will be levied on individuals with net assets valued at over €3m.

   The rate of tax will be:

   Threshold	Rate
   €3-5m	1.7%
   €5-10m	2.1%
   In excess of €10m	3.5%

   As you may be aware, the autonomous regions already apply a Wealth Tax to their residents. As such, n order to avoid double taxation, the amount paid under the existing  Wealth Tax regime will be credited against the new “Solidarity” Wealth Tax.

   It is anticipated that this new tax will be paid by around 23,000 taxpayers. The expected revenue to be raised from these new measures is around €1.5b.

   Although not yet confirmed, it is understood that non-Spanish residents who own assets in Spain will also be subject to this new tax on those assets.

   It should be noted that some parliamentary groups have already announced their intention to challenge the constitutionality of the new tax.

   Other tax announcements

   • Personal Income Tax (“PIT”) rates on savings income will increase from 26% to 27% for individuals who earn more than €200k per year. In addition, the rate for annual incomes of over €300k will increase to 28%.PIT will apply to salaries of EUR 15,000 and over, instead of the current EUR 14,000 and over.
   • Also, the effective rate of PIT will be reduced for wages between EU€18-21k.
   • There will also be changes to Corporate Income Tax (“CIT”) including the restriction on certain losses. In addition, the CIT rate for SMEs with a turnover of up to €1m will be reduced from 25% to 23%.

   If you have any queries about Solidarity Wealth Tax, or Spanish tax matters in general, then please do get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.