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Tax changes in 2015

Written by: Bridgewest

Luxembourg’s Ministry of Finance has recently released the draft budget for 2015, which includes certain measures that will become effective starting January 1st 2015. The most significant change is an increase of the value added tax by 2%, as a result of the changes made by the European Union regarding the value added tax for certain services. Investors in Luxembourg should also know that further changes concern the minimum income tax for certain business entities and a new tax that will be introduced to fund welfare initiatives.

Confirmed increased VAT rate

 
The increase of the VAT rate in Luxembourg comes as a consequence of the changes made by the EU on VAT for broadcasting, telecommunications and electronic services starting January 2015. As a result, in order to counteract a possible decrease in the nation’s revenues, the VAT will increase in Luxembourg.
 
The VAT rate applicable to the supply of goods and services in Luxembourg had a standard rate of 15% and an intermediate rate of 12% applicable to wines, printed advertising and marketing materials. The reduced rate of 6% was applicable to gas and electricity and a special 3% rate remains applicable to printed materials, e-books, water, pharmaceuticals, most foodstuffs, radio and broadcasting services. The new VAT rates applicable starting January 1st 2015 will be: a standard rate of 17%, an intermediate rate of 14% and a reduced rate of 8%. The lowest rate of 3% will remain unchanged. Starting 2015, the 17% rate will be applicable for the supply of alcohol and alcoholic beverages sold by pubs and restaurants.
 

Other changes in 2015

 
A change to the minimum income tax will concern legal entities performing financial activities in Luxembourg. The minimum income tax for these entities will drop from 3,000 euros to 500 euros. A new 0.5 percent tax will be applicable, from 2015, to gross incomes and some welfare payments.
 
Business owners in Luxembourg should pay close attention to these changes in order to make sure that they fulfill their tax compliance obligations and avoid any fines.