24 September 2015
Draft bill offers tax consolidation clarity
Tax consolidation in Luxembourg receives amendment boost
In August a draft law was presented to the Luxembourg Parliament. It concerned
the transposition of amendments to the Parent-Subsidiaries Directive and was of interest to any
international investor considering, amongst other things, the
tax benefits of Luxembourg as a jurisdiction.
The draft bill sought to address a number of issues relating to favourable
taxation measures in the jurisdiction, these included expanding the sweep of the tax
consolidation regime and issues relating to exit tax and tax credit for various investment
vehicles. It will also clarify various aspects of corporate taxation in the country.
The Parent-Subsidiaries Directive was a response to pressure to end double tax
liability for dividends distributed by European subsidiaries to parent companies. However, the
directive reportedly led to situations where some companies did not pay tax at all by using
specific hybrid debt instruments. The amendments, which are to be adopted by all member states,
are set to rectify the marginal problems presented by the initial directive.
On the other hand, the bill also aims to increase the scope of the tax unity
regime for horizontal integration between subsidiaries of European Economic Area-based parent
companies that are subject to a corporate tax comparable to Luxembourg's corporate income tax.
It is likely that the tax consolidation amendments will apply only to revenues
administered after December 2015.
This amendment gives Luxembourg companies a tax incentive when, for example, a
Luxembourg holding company suffers tax losses or heavy financing costs which it can offset
against the profits realised by one or more of its subsidiaries.
How can Creatrust help you?
- Advice on international tax
- Tax consolidation and optimisation
- Consolidated accounts (LuxGaap, IFRS)
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