FAQ

Housing Community of two persons of different sexes or of the same sex, called “partners”, living together as a couple and having entered into a registered partnership (PACS) by making representations jointly to the registrar of the commune of their common residence or place of residence in order to personalize their partnership to be certified together.

Tax class 2 is granted not only to married persons but also to registered civil partnerships under the following conditions:

• The partnership has passed the entire tax year;
• The partners have a common residence throughout the tax year;
• The assessment pursuant to Art. 157ter LEStG was chosen;
• The application was signed by both partners in the tax return form (page 3, lines 301-304).

On 27 December 2016, the Luxembourg tax authorities issued a new circular on Luxembourg financing companies (“Circulaire du directeur des contributions L.I.R. n ° 56/1 – 56bis / 1 du 27 décembre 2016”, hereinafter referred to as the “Circular of 27.12.2016”).

The circular of 27.12.2016 is very detailed and extensive, so here is a summary of the most important statements:

The circular is based on Article 56bis of the Luxembourg Income Tax Act (“LITA”), which was introduced as part of the implementation of the BEPS projects and the OECD Transfer Pricing Guidelines. Pursuant to Article 56bis LITA, any transaction between affiliates (e.g., financing, licensing, shared services, etc.) must comply with the so-called “arm’s length principle”.which means that these transactions must be executed on the same terms as under external third parties (“arm’s length principle”).

For this purpose, in a first step, the framework conditions of the transaction between affiliated companies are identified (e.g. contractual relationships, functions / roles of the participating companies and associated risks) and then in a second step with comparable transactions in the open market to be compared among third parties. This comparison provides the appropriate compensation for the transaction between the affiliated companies.

In the circular on the financing companies of 26.12.2016, the analysis of the risk associated with the financing plays a central role. This risk, as well as the resulting minimum capital requirement and the required fair compensation, must always be determined separately for each transaction.

Important: In the circular of the Luxembourg tax administration to finance companies of January 28, 2011, which contained the 1% – cap or the EUR 2 million cap for the minimum capital, is from January 1, 2017. no longer applicable.

However, the following simplification rules apply:

Luxembourg finance companies subject to Basel regulation. It is assumed that the minimum capital required under the Basel guidelines is sufficient. The minimum remuneration is 10% (after taxes) in terms of own funds.

Financing companies that act as intermediary, i.e. whose loan claim is financed by borrowed capital, as a loan is treated as a just “pass through” loan. The required minimum capital must in principle be determined for each transaction on the basis of the risk associated with the financing acitivity. The minimum remuneration for these companies is 2% (after tax) in relation to the loans financed by debt capital. In these cases no separate transfer pricing study has to be created.

The other requirements for Luxembourg financing companies, in particular those set out in the Circular of the Luxembourg Tax Administration of January 28 , 2011, must be met.

You will find attached an unofficial English translation of the circular of 27.12.2016.

Circular LIR 56-1 and 56bis-1 UNOFFICIAL ENGLISH TRANSLATION

Since January 2017, businesses have been obliged to submit their VAT returns in Luxembourg in electronic form via the eCDF platform (CDF-Collecte des Données Finanzières). The obligation to submit a monthly, quarterly or annual VAT return depends on the size of the turnover.

• Monthly VAT returns must be submitted if the annual revenue or the total value of the goods and services received from abroad on which the business is liable to pay Luxembourg VAT exceeded 620,000 euros in the previous year
• Quarterly VAT returns must be submitted if the annual revenue or the total value of intra-Community acquisitions of goods and services purchased from abroad on which Luxembourg VAT is payable was between €112,000 and €620,000 in the previous year
• Annual VAT returns must be submitted if the annual revenue and the total value of the intra-Community acquisition of goods and services from abroad on which the business is liable for Luxembourg VAT was less than 112,000 euros in the previous year
• Annual simplified VAT returns are to be submitted for businesses which are not entitled to deduct VAT and which, however, have to pay VAT in Luxembourg on intra-Community acquisitions of goods and services from abroad if their total value in the previous year was less than EUR 112 000

Even if no revenues were generated in the fiscal period, a “zero declaration” must be submitted. Otherwise, a penalty payment may be imposed.

Registration for the eCDF procedure takes place via the website https://ecdf.b2g.etat.lu/ecdf/.

For technical questions, the staff of the Centre des technologies de l’information de l’Etat (CTIE) is available (ecdf@ctie.etat.lu or tel.: 00352 247 81 677).

In order to register or log in for eCDF, users need a personal authentication by LuxTrust. This requires applying for a so-called LuxTrust certificate.

To access eCDF, there are three steps: First, a Lux Trust certificate must be applied for via the website https://www.luxtrust.lu/. Then an identification of the applicant takes place, which is a mandatory prerequisite for the issuance of the Lux Trust certificate. The Lux Trust certificate serves as the basis for applying for the eCDF access.