Greetings!
As every year in Luxembourg, the fall season announces the publication of the draft budget law which in turn foreshadows the winter Holiday Season. And this time has come.
On 12 October 2022, the 2023 draft budget law was presented to Parliament. As expected, due to the current period of crisis and uncertainty, the proposed tax measures only amend existing tax provisions to modify or clarify their scope of application, such as, for example, the clarification about the reverse hybrid rule. We describe below the clarifications proposed in the 2023 draft budget law.
On 10 October 2022, another draft law was presented to the Luxembourg parliament with the aim of carrying out the long-awaited reform of the Luxembourg property tax. This reform is based on three major axes: a modernisation of the property tax itself and the introduction of two new taxes encouraging property owners to mobilise building land and uninhabited dwellings, to combat the increasing housing shortage in Luxembourg. We will explain these
rules and the timing for their application.
At European level, the updated list of non-cooperative jurisdictions for tax purposes was published on 12 October 2022. This list directly impacts the scope of the Luxembourg corporate income tax deduction of interest and royalty expenses due to entities located in non-cooperative tax jurisdictions, the requirement to disclose transactions with entities located in non-cooperative jurisdictions and the DAC 6 rules. We provide an overview of the impacts of the
updated list in Luxembourg.
The EU Commission is also working on various new initiatives: On 12 October 2022, the EU Commission closed a public consultation regarding a proposal for a Council Directive to tackle tax advisers and other professionals rendering tax advice that facilitate tax evasion and aggressive tax planning. We provide an overview of the questionnaire and analyse to which extent there is a real need for this initiative. Moreover, on 17 October 2022, the European Commission announced the launch of a public consultation on the so-called BEFIT, a new framework for EU corporate taxation. The initiative would introduce a common set of rules for EU companies to calculate their taxable base while ensuring a more effective allocation of profits between EU countries, based on a formula. BEFIT strongly resembles the previous Common Consolidated Corporate Tax Base proposal, which has been withdrawn. We analyse this initiative and its consequences on the EU corporate tax landscape. From a VAT point of view, a Luxembourg draft law published on 26 October 2022 implements anti-inflation measures aiming to help households and businesses and one of the proposed measures is a Luxembourg VAT rates decrease. We describe this measure and its impact on consumers and businesses.
In a recent case, the CJEU clarified the notion of “granting of credit” for the purpose of determining the scope of VAT exempt financing activities. In this respect, the CJEU ruled that the acquisition by a securitisation vehicle of future proceeds from receivables of an originator should be assimilated to a VAT exempt financing activity. We explain the decision of the Court and its consequences in Luxembourg.
On 29 April 2022, the Luxembourg District Court made a referral to the CJEU for a preliminary ruling in the case on the VAT treatment of activities carried out by a natural person as a member of the board of directors of a public limited company. The CJEU will have to arbitrate between two opposing positions on this complex question. We explain what is at stake in this case.
On 5 October 2022, the Council of the European Union endorsed and published the final compromise text of the Regulation on Markets in Crypto-Assets which is meant to “protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector”. Few days later, the European Parliament Committee on Economic and Monetary Affairs also approved a provisional deal on the Transfer of Funds Regulation that would require exchanges to report any crypto transactions to authorities. We describe these new regulations, which represent a significant milestone in the development of the crypto industry in Europe. We hope you enjoy reading our insights.