A deficit generated in one financial year can be charged against the profits of other financial years in order to reduce the tax base of these years. The loss can be deducted from the profits made during any subsequent financial year (carryforward), with no time limit applicable to loss carryforwards.
Loss of 100 in year 1, profit of 60 in year 2, profit of 80 in year 3.
Year 1: 0
Year 2: 60 - 60 of losses carried forward from the previous year = 0 (losses carried forward to the following year = 100 - 60 = 40)
Year 3: 80 - 40 of losses carried forward = 40.
In order to prevent this system from being abused, the business that incurs the loss and the one that carries forward the loss must be identified as the same. For instance, it would constitute an abuse by investors if, instead of forming a new company, they were to acquire a company with significant loss carryforwards and start a new business activity unrelated to the previous activity of the company, with the sole intention of benefiting from the loss carryforwards.
Tax return and payment
Accounting and tax return obligations of the company
The company must declare its taxable income. Following controls and investigations, the authorities will set the tax debt that the business will have to pay within the specified deadlines.
Income tax return
Companies are required to submit an annual income tax return, normally before 31 May. This period may be extended following a duly justified request.
In principle, the declaration must be submitted online with MyGuichet.lu:
- either by using the online data input assistant;
- or by pre-completing the form with a structured XML file.
Corporate entities excluded from the mandatory online filing must continue to submit their declaration in paper format. These entities are:
- non-resident companies;
- agricultural associations;
- cooperative companies.
The documents that have to be provided with the tax return vary depending on the activities of the company. They should at least include: the balance sheet, the income statement, the table of fixed assets and depreciations and a statement of certain overheads.
Provisional advance payments
Companies subject to corporate income tax make provisional advance payments every quarter on the dates laid down by law (March, June, September, December). The amount of advance payments is determined by the tax office and is based on the last tax bulletins.
The balance payable is also determined by the tax office following the issue of the tax bulletin. The bulletin indicates the outstanding tax amount, as well as the date on which the balance must be paid (usually one month after the issue of the bulletin).
Minimum amount of tax
Corporate entities may be subject to a minimum tax rate which is available on the website of the Luxembourg Inland Revenue.