All income resulting from an economic activity carried out by an entrepreneur or a company is subject to income tax. This tax is levied on the taxable income made by the taxpayer during the tax year.
When the business starts its activity, it is registered with the Luxembourg Inland Revenue (Administration des contributions directes - ACD) in order to comply with its tax obligations.
In principle, the business is directly contacted by post by the competent tax office.
Failing this, the business is required to contact the ACD.
Who is concerned
In general, every economic entity that may have income must register with the ACD and become subject to income tax.
The profits of fiscally transparent sole proprietorships and companies are taxable on the entrepreneur, in other words, the income of the entrepreneur will be taxed. This concerns the following structures:
- partnership (SENC);
- limited partnership (SECS);
- sole proprietorship (sole trader, self-employed person);
- economic interest groups (GIE) and European economic interest groups (GEIE).
The corporate income tax mainly concerns the following company structures:
- limited liability company (SARL);
- partnership limited by shares (SECA);
- cooperative company (société coopérative).
In order to register with the ACD:
- a sole proprietorship must hold a valid business permit.
When the business permit is granted to a natural person, the General Directorate for SMEs and Entrepreneurship (Direction générale PME et Entrepreneuriat) informs the ACD.
the business registered as a company (legal person) must lodge its articles of association with the trade and companies register (registre de commerce et des sociétés - for capital companies and partnerships) for the purpose of publication in the electronic compendium of companies and associations (Recueil électronique des sociétés et associations).
The Government IT Centre (Centre des technologies de l'information de l'Etat - CTIE) automatically assigns a national identification number to the company.
There is no separate assignment procedure regarding the national identification number for sole proprietorships. As the operators are taxed as natural persons on the income of such structures, the identification number used is the one assigned to them when they affiliated with the Joint Social Security Centre (Centre commun de la sécurité sociale - CCSS).
How to proceed
Generally speaking, the Luxembourg Inland Revenue (ACD) directly notifies the individual business or company by post of the dossier number and the competent tax office.
This letter may be accompanied by a start-up declaration (or initial declaration) to be completed by the taxpayer.
The declaration must include the following information:
- planned activity;
- legal structure;
- identity and contact details of the applicant / representative;
- identity and contact details of the natural person working in his own name and the operating site (address of the owner in the case of rented premises);
- company name and details;
- contact details of the legal representatives;
- contact details of the accountant;
- expected operating result for the first two years of operation.
On the basis of this declaration, the competent tax office may, where appropriate, set the quarterly advances for income tax or corporate income tax (impôt sur le revenu - IR or IRC), business tax (impôt commercial - IC) and, for fiscally non-transparent companies, the net wealth tax (impôt sur la fortune - IF).
If the business is not contacted directly by the competent tax office, it must contact the ACD itself to make an initial declaration.