Corporate income tax is a special proportional tax levied on gains made by certain corporations (including capital companies) during the financial year.
Capital companies are fiscally opaque, i.e. as corporate entities, they are taxpayers and subject to the tax on companies called corporate income tax (impôt sur le revenu des collectivités - IRC).
Who is concerned
Corporate income tax applies mainly to the following legal forms of capital companies:
- public limited companies (société anonyme - SA);
- partnerships limited by shares (société en commandite par actions - SECA or SCA) - their taxable amount also includes the share of profits accruing to general partners;
- limited liability companies (société à responsabilité limitée - SARL) and single member limited liability companies.
- SICAV – open-ended investment company, i.e. a public limited company whose particularity is the variable capital;
- SICAF – closed-ended investment company, i.e. a public limited company with the exception of its investment policy.
How to proceed
Taxation in Luxembourg: the principle of territoriality
Given the territoriality of tax, only companies that have a sufficiently strong attachment with Luxembourg have unlimited tax liability.
This is valid for resident companies, i.e. a company who has its registered office or centre of effective management in Luxembourg.
Non-resident companies, i.e. a company whose registered office is not in Luxembourg but who generates Luxembourg income is subject to limited tax liability.
Resident companies are taxable on their worldwide income.
However, if the foreign income is collected in a country who has concluded a tax agreement with Luxembourg to eliminate double taxation, the foreign income will be exempt from Luxembourg tax if it was generated by a permanent establishment.
Non-resident companies are only taxable on their local income in Luxembourg.
- 20 % where the taxable income does not exceed EUR 15,000;
- 21 % where the taxable income exceeds EUR 15,000.
An additional charge of 7 % is levied on corporate income tax as a contribution to the employment fund.
Amount of minimum tax
In some cases, businesses are subject to the payment of a minimum tax where the amount set is based on the closing balance in their last annual accounts.
Tax return and payment
Accounting and tax return obligations of the company
The company must declare its taxable income to the Luxembour Inland Revenue (ACD) who will calculate the amount of tax due by the company and set the terms of payment.
Corporate entities are in principle required to submit an online declaration for corporate income tax with the online input assistant on MyGuichet.lu.
The various fields in the assistant can also be automatically prefilled through the import of 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.
Tax return documents
Depending on the company's activity and the applicable tax scheme, the tax return must be submitted together with the accounting documents that have been used to calculate the company results.
In any case, the tax return documents must include:
- the balance sheet;
- the profit and loss account;
- table of fixed assets and depreciations;
- the financial statements of the overhead expenses.
Payment of tax
Provisional advance payments
Companies subject to corporate income tax make provisional advance payments every quarter on the settlement dates laid down by law (March, June, September, December). The amount of these advance payments has been provisionally set based on the last tax return (from the previous financial year) and automatically adjusted upon request from the company, where applicable.
The company receives back the tax return indicating the tax payable for the current financial year. The tax return shows the remaining balance taking into account the provisional payments made and the payment deadline (usually one month after receipt of the tax return).
Sometimes the balance is negative; i.e. the company has a claim against the tax authorities. The reimbursement can:
- be paid on the company's bank account;
- be deducted from any other amount due by the company to the tax authorities (e.g.: the income tax claim can be deducted from the net wealth tax due).
It is possible to submit a request for a tax exemption to the Luxembourg Inland Revenue.
In order to benefit from a tax exemption, businesses must set up new establishments or develop new processes which are known to contribute to the structural development and improvement of the economy, to the development of the regional economy or to a better geographical distribution of economic activities.
Duration and amount
Exemption is then granted for a period of 10 years and amounts to 25 % of the total profit of the business. It can not exceed 10 % of the investments made, nor a certain percentage of labour costs in relation to the permanent jobs which have been newly created.(see the section "Forms / Online services").
Forms / Online services
Corporate income tax (Income tax, Business tax 2014, Net wealth tax 2015) - online service
Impôt des collectivités (impôt sur le revenu, impôt commercial 2014 et impôt sur la fortune 2015)- service en ligne
Körperschaftsteuer (Einkommensteuer, Gewerbesteuer 2014, Vermögensteuer 2015) - Online- Assistent
Corporate income tax (Income tax, Business tax 2015, Net wealth tax 2016) - online service
Impôt des collectivités (impôt sur le revenu, impôt commercial 2015, impôt sur la fortune 2016) - service en ligne
Körperschaftsteuer (Einkommensteuer, Gewerbesteuer 2015, Vermögensteuer 2016) - Online- Assistent
Corporate income tax (Income tax, Business tax 2016, Net wealth tax 2017) - online service
Impôt des collectivités (impôt sur le revenu, impôt commercial 2016, impôt sur la fortune 2017) - service en ligne
Körperschaftsteuer (Einkommensteuer, Gewerbesteuer 2016, Vermögensteuer 2017) - Online- Assistent
Corporate income tax (Income tax, Business tax 2017, Net wealth tax 2018) - online service
Impôt des collectivités (impôt sur le revenu, impôt commercial 2017, impôt sur la fortune 2018) - service en ligne
Körperschaftsteuer (Einkommensteuer, Gewerbesteuer 2017, Vermögensteuer 2018) - Online- Assistent