Luxembourg
Tax Guide
2012
PKF Worldwide Tax Guide 2012I
foreword
A country’s tax regime is always a key factor for any business considering moving
into new markets. What is the corporate tax rate? Are there any incentives for
overseas businesses? Are there double tax treaties in place? How will foreign source
income be taxed?
Since 1994, the PKF network of independent member firms, administered by PKF
International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide
international businesses with the answers to these key tax questions. This handy
reference guide provides clients and professional practitioners with comprehensive
tax and business information for 100 countries throughout the world.
As you will appreciate, the production of the WWTG is a huge team effort and I
would like to thank all tax experts within PFK member firms who gave up their time
to contribute the vital information on their country’s taxes that forms the heart of this
publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF
Witt Mares, and Kaarji Vaughan, PKF Melbourne for co-ordinating and checking the
entries from countries within their regions.
The WWTG continues to expand each year reflecting both the growth of the PKF
network and the strength of the tax capability offered by member firms throughout
the world.
I hope that the combination of the WWTG and assistance from your local PKF
member firm will provide you with the advice you need to make the right decisions
for your international business.
Jon Hills
PKF (UK) LLP
Chairman, PKF International Tax Committee

PKF Worldwide Tax Guide 2012 II

important disclaimer
This publication should not be regarded as offering a complete explanation of the
taxation matters that are contained within this publication.
This publication has been sold or distributed on the express terms and understanding
that the publishers and the authors are not responsible for the results of any actions
which are undertaken on the basis of the information which is contained within this
publication, nor for any error in, or omission from, this publication.
The publishers and the authors expressly disclaim all and any liability and
responsibility to any person, entity or corporation who acts or fails to act as a
consequence of any reliance upon the whole or any part of the contents of this
publication.
Accordingly no person, entity or corporation should act or rely upon any matter or
information as contained or implied within this publication without first obtaining
advice from an appropriately qualified professional person or firm of advisors, and
ensuring that such advice specifically relates to their particular circumstances.
PKF International is a network of legally independent member firms administered by
PKF International Limited (PKFI). Neither PKFI nor the member firms of the network
generally accept any responsibility or liability for the actions or inactions on the part
of any individual member firm or firms.
PKF Worldwide Tax Guide 2012III
preface
The PKF Worldwide Tax Guide 2012 (WWTG) is an annual publication that provides
an overview of the taxation and business regulation regimes of 100 of the world’s
most significant trading countries. In compiling this publication, member firms of the
PKF network have based their summaries on information current as of 30 September
2011, while also noting imminent changes where necessary.
On a country-by-country basis, each summary addresses the major taxes applicable
to business; how taxable income is determined; sundry other related taxation
and business issues; and the country’s personal tax regime. The final section of
each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax

withholding relating to the payment of dividends, interest, royalties and other related
payments.
While the WWTG should not to be regarded as offering a complete explanation of
the taxation issues in each country, we hope readers will use the publication as their
first point of reference and then use the services of their local PKF member firm to
provide specific information and advice.
In addition to the printed version of the WWTG, individual country taxation guides are
available in PDF format which can be downloaded from the PKF website at www.pkf.com
PKF INTERNATIONAL LIMITED
APRIL 2012
©PKF INTERNATIONAL LIMITED
ALL RIGHTS RESERVED
USE APPROVED WITH ATTRIBUTION
PKF Worldwide Tax Guide 2012 IV
about pKf international limited
PKF International Limited (PKFI) administers the PKF network of legally independent
member firms. There are around 300 member firms and correspondents in 440
locations in around 125 countries providing accounting and business advisory services.
PKFI member firms employ around 2,200 partners and more than 21,400 staff.
PKFI is the 10th largest global accountancy network and its member firms have $2.6
billion aggregate fee income (year end June 2011). The network is a member of the
Forum of Firms, an organisation dedicated to consistent and high quality standards of
financial reporting and auditing practices worldwide.
Services provided by member firms include:
Assurance & Advisory
Corporate Finance
Financial Planning
Forensic Accounting
Hotel Consultancy
Insolvency – Corporate & Personal

IT Consultancy
Management Consultancy
Taxation
PKF member firms are organised into five geographical regions covering Africa; Latin
America; Asia Pacific; Europe, the Middle East & India (EMEI); and North America &
the Caribbean. Each region elects representatives to the board of PKF International
Limited which administers the network. While the member firms remain separate
and independent, international tax, corporate finance, professional standards, audit,
hotel consultancy, insolvency and business development committees work together to
improve quality standards, develop initiatives and share knowledge and best practice
cross the network.
Please visit www.pkf.com for more information.
PKF Worldwide Tax Guide 2012V
structure of country descriptions
a. taXes payable
FEDERAL TAXES AND LEVIES
COMPANY TAX
CAPITAL GAINS TAX
BRANCH PROFITS TAX
SALES TAX/VALUE ADDED TAX
FRINGE BENEFITS TAX
LOCAL TAXES
OTHER TAXES
b. determination of taXable income
CAPITAL ALLOWANCES
DEPRECIATION
STOCK/INVENTORY
CAPITAL GAINS AND LOSSES
DIVIDENDS
INTEREST DEDUCTIONS

LOSSES
FOREIGN SOURCED INCOME
INCENTIVES
c. foreiGn taX relief
d. corporate Groups
e. related party transactions
f. witHHoldinG taX
G. eXcHanGe control
H. personal taX
i. treaty and non-treaty witHHoldinG taX rates
PKF Worldwide Tax Guide 2012 VI
A
Algeria . . . . . . . . . . . . . . . . . . . .1 pm
Angola . . . . . . . . . . . . . . . . . . . .1 pm
Argentina . . . . . . . . . . . . . . . . . .9 am
Australia -
Melbourne . . . . . . . . . . . . .10 pm
Sydney . . . . . . . . . . . . . . .10 pm
Adelaide . . . . . . . . . . . . 9.30 pm
Perth . . . . . . . . . . . . . . . . . .8 pm
Austria . . . . . . . . . . . . . . . . . . . .1 pm
B
Bahamas . . . . . . . . . . . . . . . . . . .7 am
Bahrain . . . . . . . . . . . . . . . . . . . .3 pm
Belgium . . . . . . . . . . . . . . . . . . . .1 pm
Belize . . . . . . . . . . . . . . . . . . . . .6 am
Bermuda . . . . . . . . . . . . . . . . . . .8 am
Brazil. . . . . . . . . . . . . . . . . . . . . .7 am
British Virgin Islands . . . . . . . . . . .8 am
C

Canada -
Toronto . . . . . . . . . . . . . . . .7 am
Winnipeg . . . . . . . . . . . . . . .6 am
Calgary . . . . . . . . . . . . . . . .5 am
Vancouver . . . . . . . . . . . . . .4 am
Cayman Islands . . . . . . . . . . . . . .7 am
Chile . . . . . . . . . . . . . . . . . . . . . .8 am
China - Beijing . . . . . . . . . . . . . .10 pm
Colombia . . . . . . . . . . . . . . . . . . .7 am
Croatia . . . . . . . . . . . . . . . . . . . .1 pm
Cyprus . . . . . . . . . . . . . . . . . . . .2 pm
Czech Republic . . . . . . . . . . . . . .1 pm
D
Denmark . . . . . . . . . . . . . . . . . . .1 pm
Dominican Republic . . . . . . . . . . .7 am
E
Ecuador . . . . . . . . . . . . . . . . . . . .7 am
Egypt . . . . . . . . . . . . . . . . . . . . .2 pm
El Salvador . . . . . . . . . . . . . . . . .6 am
Estonia . . . . . . . . . . . . . . . . . . . .2 pm
F
Fiji . . . . . . . . . . . . . . . . .12 midnight
Finland . . . . . . . . . . . . . . . . . . . .2 pm
France. . . . . . . . . . . . . . . . . . . . .1 pm
G
Gambia (The) . . . . . . . . . . . . . 12 noon
Georgia . . . . . . . . . . . . . . . . . . . .3 pm
Germany . . . . . . . . . . . . . . . . . . .1 pm
Ghana . . . . . . . . . . . . . . . . . . 12 noon
Greece . . . . . . . . . . . . . . . . . . . .2 pm

Grenada . . . . . . . . . . . . . . . . . . .8 am
Guatemala . . . . . . . . . . . . . . . . . .6 am
Guernsey . . . . . . . . . . . . . . . . 12 noon
Guyana . . . . . . . . . . . . . . . . . . . .7 am
H
Hong Kong . . . . . . . . . . . . . . . . .8 pm
Hungary . . . . . . . . . . . . . . . . . . .1 pm
I
India . . . . . . . . . . . . . . . . . . . 5.30 pm
Indonesia. . . . . . . . . . . . . . . . . . .7 pm
Ireland . . . . . . . . . . . . . . . . . . 12 noon
Isle of Man . . . . . . . . . . . . . . 12 noon
Israel . . . . . . . . . . . . . . . . . . . . . .2 pm
Italy . . . . . . . . . . . . . . . . . . . . . .1 pm
J
Jamaica . . . . . . . . . . . . . . . . . . .7 am
Japan . . . . . . . . . . . . . . . . . . . . .9 pm
Jersey . . . . . . . . . . . . . . . . . . 12 noon
Jordan . . . . . . . . . . . . . . . . . . . .2 pm
K
Kazakhstan . . . . . . . . . . . . . . . . .5 pm
Kenya . . . . . . . . . . . . . . . . . . . . .3 pm
Korea . . . . . . . . . . . . . . . . . . . . .9 pm
Kuwait . . . . . . . . . . . . . . . . . . . . .3 pm
L
Latvia . . . . . . . . . . . . . . . . . . . . .2 pm
Lebanon . . . . . . . . . . . . . . . . . . .2 pm
Liberia . . . . . . . . . . . . . . . . . . 12 noon
Luxembourg . . . . . . . . . . . . . . . .1 pm
M

Malaysia . . . . . . . . . . . . . . . . . . .8 pm
Malta . . . . . . . . . . . . . . . . . . . . .1 pm
Mauritius . . . . . . . . . . . . . . . . . . .4 pm
Mexico . . . . . . . . . . . . . . . . . . . .6 am
Morocco . . . . . . . . . . . . . . . . 12 noon
N
Namibia. . . . . . . . . . . . . . . . . . . .2 pm
Netherlands (The) . . . . . . . . . . . . .1 pm
New Zealand . . . . . . . . . . .12 midnight
Nigeria . . . . . . . . . . . . . . . . . . . .1 pm
Norway . . . . . . . . . . . . . . . . . . . .1 pm
O
Oman . . . . . . . . . . . . . . . . . . . . .4 pm
P
Panama. . . . . . . . . . . . . . . . . . . .7 am
Papua New Guinea. . . . . . . . . . .10 pm
Peru . . . . . . . . . . . . . . . . . . . . . .7 am
Philippines . . . . . . . . . . . . . . . . . .8 pm
Poland. . . . . . . . . . . . . . . . . . . . .1 pm
Portugal . . . . . . . . . . . . . . . . . . .1 pm
Puerto Rico . . . . . . . . . . . . . . . . .8 am
international time Zones
AT 12 NOON, GREENWICH MEAN TIME, THE STANDARD TIME
ELSEWHERE IS:
PKF Worldwide Tax Guide 2012VII
Q
Qatar. . . . . . . . . . . . . . . . . . . . . .8 am
R
Romania . . . . . . . . . . . . . . . . . . .2 pm
Russia -

Moscow . . . . . . . . . . . . . . .3 pm
St Petersburg . . . . . . . . . . . .3 pm
S
Sierra Leone . . . . . . . . . . . . . 12 noon
Singapore . . . . . . . . . . . . . . . . . .7 pm
Slovak Republic . . . . . . . . . . . . . .1 pm
Slovenia . . . . . . . . . . . . . . . . . . .1 pm
South Africa . . . . . . . . . . . . . . . . .2 pm
Spain . . . . . . . . . . . . . . . . . . . . .1 pm
Sweden . . . . . . . . . . . . . . . . . . . .1 pm
Switzerland . . . . . . . . . . . . . . . . .1 pm
T
Taiwan . . . . . . . . . . . . . . . . . . . .8 pm
Thailand . . . . . . . . . . . . . . . . . . .8 pm
Tunisia . . . . . . . . . . . . . . . . . 12 noon
Turkey . . . . . . . . . . . . . . . . . . . . .2 pm
Turks and Caicos Islands . . . . . . .7 am
U
Uganda . . . . . . . . . . . . . . . . . . . .3 pm
Ukraine . . . . . . . . . . . . . . . . . . . .2 pm
United Arab Emirates . . . . . . . . . .4 pm
United Kingdom . . . . . . .(GMT) 12 noon
United States of America -
New York City . . . . . . . . . . . .7 am
Washington, D.C. . . . . . . . . .7 am
Chicago . . . . . . . . . . . . . . . .6 am
Houston . . . . . . . . . . . . . . . .6 am
Denver . . . . . . . . . . . . . . . .5 am
Los Angeles . . . . . . . . . . . . .4 am
San Francisco . . . . . . . . . . .4 am

Uruguay . . . . . . . . . . . . . . . . . . .9 am
V
Venezuela . . . . . . . . . . . . . . . . . .8 am
Vietnam . . . . . . . . . . . . . . . . . . . .7 pm
PKF Worldwide Tax Guide 2012 1
Luxembourg
luXembourG
Currency: Euro Dial Code To: 352 Dial Code Out: 00
(EUR)
Member Firm:
City: Name: Contact Information:
Luxembourg Ronald Weber 453 8781

a. taXes payable
COMPANY TAX
Luxembourg resident companies are subject to tax on their worldwide income.
A company is deemed resident in Luxembourg if it has its corporate address or
its central management in Luxembourg.
Non-resident companies are only taxable on specific Luxembourg-sourced income
such as:
• incomeattributabletoapermanentestablishmentlocatedinLuxembourg
• incomederivedfrom‘ambulant’activitiesrequiringaspeciallicenceandcarried
on in the country (i.e. mobile activities such as hairdressing and the provision of
fairground attractions)
• professionalincomefromsportsorculturaleventstakingplaceinthecountry
• incomefromagricultureorforestrycarriedoninthecountry
• incomefromprofessionalservicescarriedoninthecountry(i.e.doctors,
solicitors, accountants)
• dividends,interestfromprotsharingloansandinterestfrombondsifthe
paying agent is the State or a resident individual or company (exception:

securitisation vehicles)
• interestfromloanssecuredonLuxembourgrealestate
• rentalincomefromrealestateorgoodslocatedinLuxembourgorrecordedina
public domestic register (aeroplanes, ships, patents, copyrights, surface rights,
emphythéoses, brands, cars) or used by a permanent establishment located in
Luxembourg
• capitalgainsfromthesaleofrealestatelocatedinLuxembourg
• capitalgainsfromthesaleofshareholdingsof10%ormoreinresident
companies (except SICARs):
– if acquired less than six months prior to disposal or
– if the seller was resident in Luxembourg for more than 15 years and
became non-resident less than five years prior to disposal.
Thegeneraleffectivecorporationtaxrateforresidentcompaniesis22.05%.This
consistsofcorporatetaxof21%anda5%surchargefortheemploymentfund.
CompanieswithtaxableincomeofnotmorethanEUR15,000paytaxat21%.
In addition, a municipal business tax is payable at rates which vary in different areas.
Therateis6.75%inthecityofLuxembourg,producingacombinedcorporatetax
rateof28.80%.
CAPITAL GAINS TAX
Capital gains are in principle regarded as ordinary business income and are taxed at
the normal corporate rate. Exemptions and roll-over relief apply in some cases.
BRANCH PROFITS TAX
Tax rates and measures apply in the same way as for Luxembourg corporations. No
force of attraction rule is applicable.
SPECIAL REGIMES AND MEASURES
FAMILY WEALTH MANAGEMENT COMPANY (SOCIÉTÉ DE
GESTION DE PATRIMOINE FAMILIAL (SPF))
The SPF is exempt from corporate income tax, municipal business tax and net wealth
tax,butsubjecttoanannualsubscriptiontaxof0.25%basedonsharecapitaland
share premiums.

SOPARFI (SOCIÉTÉ DE PARTICIPATIONS FINANCIÈRES)
These are companies created to take advantage of the participation exemption in
internal law (see below: taxation of capital gains and dividends).
FIDUCIARY (FIDUCIE)
This is a legal framework for setting-up agreements to split beneficial ownership from
legal ownership of assets. It is most commonly used for ensuring privacy and efficient
management or transfer of assets.
PKF Worldwide Tax Guide 20122
INVESTMENT FUND
Approval for investment fund status is granted by the Commission de Surveillance du
SecteurFinancier(‘theRegulator’).Investmentfundsareexemptfromtaxexceptfor:
(a) anannualsubscriptiontaxof0.01%and0.05%onthevalueofsharesheldby
institutional investors or private investors respectively
(b) VAT on purchases and services not linked to the management of the fund.
SPECIALISED INVESTMENT FUND (SIF) (FONDSD’INVESTISSEM
ENTSPÉCIALISÉ)
Compared to traditional investment funds, the SIF has greater flexibility with regard to
investment policy and less regulatory constraints due to the fact that it is reserved for
professional or well-informed investors. There are no initiator/promoter requirements.
SIFs are exempt from tax except:
(i) anannualsubscriptiontaxof0.01%onthevalueofnetassetsoftheSIF
(ii) VAT on purchases and services not linked to the management of the fund.
SECURITISATION VEHICLE (ORGANISME DE TITRISATION)
These vehicles convert assets, liabilities and risks into transferable securities. The
structure involves an originator, the vehicle and the investors. The originator transfers
assets of any type (e.g. receivables, lorries, wine, real estate, rental income) to the
vehicle, with or without a sale back agreement. The vehicle issues securities and
uses the funds collected to pay for the purchase of the assets.
Two types of structures are available:
(a) the securitisation fund, which follows the same rules as investment funds,

except that no subscription tax is levied
(b) the securitisation company, which is a fully taxable entity that qualifies for the
application of tax treaties and EU directives.
For securitisation companies, any commitments to investors or creditors, such as
for paying dividends or interest, qualify as a deductible expense which leads, in most
cases, to full tax neutralisation. Such companies are exempt from net worth tax.
VENTURE CAPITAL FUND (SOCIÉTÉ D’INVESTISSEMENT À
CAPITAL RISQUE (SICAR))
SICAR is a specific vehiclefor collecting venture capital from professional or well-
informed investors. SICARs may invest in assets with high-risk/increased return
perspectives: no restrictions or ratios apply. SICARs are fully taxable entities and
qualify for the application of tax treaties and EU Directives. They are exempt from tax
on any income from securities (dividends, capital gains) and from cash held for future
eligible investments. Non-resident beneficiaries are exempt from tax in Luxembourg
on income derived from these companies. Umbrella SICARs are able to create
multiple investment compartments with specific investment policies.
SHIPPING REGISTER
In addition to specific and general incentives, shipping companies are subject to
corporate(22.05%)andenjoysimpliedruleswithrespecttosocialsecurityand
wage tax.
CO-ORDINATION CENTRES, MULTI-NATIONAL FINANCE
COMPANIES
Under specific circumstances, it is possible for such companies to obtain advance
rulings for various structurings, including transfer pricing and finance margins.
VALUE ADDED TAX (VAT)
VAT is applied on the supply of goods and services within Luxembourg and on the
supply to non-VAT registered persons or entities within the EU. The standard rate is
15%.Thereducedratesare3%,6%and12%.
OTHER TAXES
There is no stamp duty on the transfer of shares or goodwill in Luxembourg. Other

Luxembourg taxes include:
• networthtax(0.5%onnetassetvalue.Exemptionsincludesubstantial
shareholdings and intellectual property). Net worth tax may be neutralized by
building a reserve amounting to five times the amount of tax which has been
maintained for 5 years
• Soparminimumtax:aSoparhastopayannuallyaminimumcorporationtax
of EUR 1,575
• subscriptiontaxpayablebyholdingcompanies1929(0.2%),SPFs(0.25%)and
investmentfunds(0.05%or0.01%,seeabove)
• stampdutiesondonations,paymentofsharecapitalandrealestatetransfersat
the rates set out below:
Luxembourg
PKF Worldwide Tax Guide 2012 3
Real estate sales in Luxembourg/Luxembourg city 7%*/10%*
Real estate sales in Luxembourg/Luxembourg city – for resale 8.2%*/11.8%*
Idem reimbursement in case of sale within 2/4 years – country 6%*/4.8%*
Idem reimbursement in case of sale within 2/4 years – city 9%*/7.2%*
Swap of land (same municipality): Swap/compensatory
payment,country*
0.25%/0.75%*
Swap of other real estate located in Luxembourg/Luxembourg city 5.80%*/8.2%*
Leases over 9 years and long leases (emphythéoses) 27–99 years 0.60%
Contribution of real estate to pay in company share capital 1.2%
Donation of real estate to one’s children or parents with/without
setoffagainstlaterheritage*
2.8%/3.4%
Donation of real estate in Luxembourg/Luxembourg city
betweenspouses*
5.8%/8.2%
*Transcriptiontaxof1%included(0.5%forswapofland),notaryfees±0.5%tobeadded

b. determination of taXable income
The taxable income of a company is the difference between taxable income and
allowable deductions. All business expenses are deductible. Expenses linked to
exempt income are deductible to the extent that they exceed exempt income. Owner-
run businesses accumulate deductible social reserves up to EUR 62,000 and an
additional EUR 62,000 if reserves are backed by insurance.
DEPRECIATION
Methods used are the straight-line depreciation and the declining balance at rates
reflecting economic or technical obsolescence. Land may not be written off and
buildings may only be depreciated by the straight-line method.
STOCK/INVENTORY
Inventory includes raw materials, work in progress, finished goods and real estate
bought for resale. Valuation is at the lower of production or purchase cost and market
value. Accepted valuation methods include FIFO, LIFO and any other method if
justified and applied consistently.
CAPITAL GAINS AND LOSSES
In principle, capital gains and losses from business assets are taxed at the ordinary tax rate.
There is a roll-over-relief for profits from the sale of real estate or non-depreciable assets.
Capital gains from the sale of substantial shareholdings are tax exempt. Substantial
shareholdingsareshareholdingsofatleast10%orofanacquisitioncostofatleast
EUR 6,000,000 held for 12 months. The exemption applies to all subsidiaries that come
under the scope of the EU Parent-Subsidiary directive (90/435/CEE) as well as any
companywhichissubjecttoacorporatetaxataminimumrateof10.5%.Expenses
connected to substantial shareholdings (eg interest on loans to finance the acquisition
of such a shareholding) are only deductible to the extent that they exceed exempt
income arising from the participation. A recapture mechanism provides for subsequent
capital gains to be taxed up to the amount of the expensesclaimed as deductions in
prioryears.An80%exemptionappliestothecapitalgainrealisedfromthesaleof
intellectual property. A recapture mechanism provides for subsequent capital gains to
be taxed up to the amount of the expenses claimed as deductions in prior years.

INCOME FROM INTELLECTUAL PROPERTY
An80%exemptionappliestoanyincomefromIPincludinggainsfromthedisposal
of IP. Any IP such as software, brands, patents, designs etc qualify. Exceptions include
literary or art copyrights, plans, formulas, trade secrets and similar rights.
DIVIDENDS
Dividends from substantial shareholdings are tax exempt. Substantial shareholdings
areshareholdingsofatleast10%orofanacquisitioncostofatleastEUR1,200,000
held for at least 12 months. The exemption applies to all subsidiaries that come
under the scope of the EU Parent-Subsidiary Directive (90/435/CEE) as well as any
companywhichissubjecttoacorporatetaxataminimumrateof10.5%.Dividends
from fully taxable companies in which the recipient does not have a substantial
shareholdingare50%taxexempt.
INTEREST DEDUCTIONS
Interest on loans associated with investments intended to generate taxable income
is deductible. Interest associated with exempt income is deductible only to the extent
that it exceeds such income. Thin capitalisation ratios apply to some investments and
businesses, eg a debt/equity ratio of 6:1applies to Soparfis.
Luxembourg
PKF Worldwide Tax Guide 20124
LOSSES
Losses may be carried forward indefinitely. No carry-back is allowed.
FOREIGN SOURCED INCOME:
Foreign sourced income is generally taxable under domestic law. Luxembourg has no
CFC(‘controlledforeigncompany’)legislation.
INCENTIVES
Investment incentives by way of cumulative tax credits are available as follows and
may be carried forward for 10 years:
(a) 13%ofthedifferencebetweenthevalueoftotaldepreciablexedassetsother
than real estate and the average value of such assets during the last five years
(b) 7%oninvestmentsuptoEUR150,000insuchassetsduringthetaxyear

and3%oninvestmentsexceedingEUR150,000.Forinvestmentslinkedto
environmental protection or adaptations enabling the hiring of disabled persons,
theratesare8%and4%respectively.
 • Incentivesforinvestment,restructuringactivitiesorresearchand
development and for the setting up and development of industrial or service-
providing businesses are granted in various ways including subsidies,
promotional assistance, tax exemptions credits and state guarantees.
 • Incentivesforinvestmentinmovieproduction(MediaportLuxembourg)
are available by way of negotiable certificates allocated by the State of
a nominal amount up to the total amount of production costs incurred in
Luxembourg. Certificates may be assigned to resident companies who
mayclaimataxcreditof30%ofthenominalamountuptoamaximum
  of30%oftheirtaxableprots.
 • Thereareincentivesforinvestmentinthedevelopmentofnewproducts,
the launching of the production phase and the initial marketing thereof
by way of negotiable certificates allocated by the State. Certificates are
assignable and give rise to tax credits like the audiovisual certificates
described in the preceding point. Certificates may not amount to less than
EUR 100,000 or more than EUR 5,000,000.
 • Incentivesarealsoavailableforhiringunemployedindividualsbywayof
amonthlytaxcreditof15%ofmonthlysalariesforaperiodof36months
after hiring.
 • Thereareincentivesforcontinuingprofessionaleducationbywayofatax
creditof10%orasubsidyof14.5%ofeligibleexpensesforcontinuing
education such as planning, evaluation, travel, catering and registration fees.
 • Investmentincentivesarealsoavailableforfullyequippedland,atlow
cost, in business parks.
 • Otherincentivesincludegovernmentalinvestmentgrants,mediumand
long-term loans by National Investment Credit Bank, ECSC and Research
and Development loans, and export financing (Ducroire).

c. foreiGn taX relief
Foreign income tax may be credited against domestic income tax up to the amount
of the domestic tax. If the foreign tax exceeds domestic tax,the excess is generally
allowable as a deduction against taxable profits. No relief is available for underlying
tax arising on dividends from overseas companies.
d. corporate Groups
Profits and losses of Luxembourg group companies may be pooled and taxed as
if earned by a single entity. Group members may include Luxembourg resident
companies and Luxembourg permanent establishments of non-resident companies.
Atleast95%ofthecapitalofeachgroupmembermustbeheld,directlyorindirectly,bya
fully taxable Luxembourg resident company. If the subsidiary contributes substantially to the
structuralimprovementofthedomesticeconomy,theholdingrequiredisreducedto75%.
e. related party transactions
Transactions by a company with shareholders and related parties have to be at an
arm’s length basis. Domestic law provides for transactions in breach of this principle
to result in deemed distributions of profit which are subject to withholding tax and an
adjustment in the tax base of the parties involved.
f. witHHoldinG taX
DIVIDENDS
Dividends paid by special purpose vehicles such as SPFs, investment funds and
SICARs are not subject to withholding tax. Dividends paid by fully taxable companies
aresubjecttoa15%withholdingtax,possiblyreducedbyapplicabletaxtreaties.
Dividends paid to companies that come under the scope of the EU Parent-Subsidiary
directive or which are fully taxable and resident in treaty countries are exempt from
withholding tax (see above).
Luxembourg
PKF Worldwide Tax Guide 2012 5
INTEREST
Further to the EU Savings Directive (2003/48/EC) interest paid to individuals resident
intheEUissubjecttoa35%withholdingtax.InterestpaidtoLuxembourgresidents

issubjecttoa10%nalwithholdingtax.
ROYALTIES
Luxembourg does not levy withholding tax on royalties.
G. eXcHanGe control
There are no exchange control rules in Luxembourg.
H. personal taX
Resident individuals pay tax on their worldwide income. Individuals are deemed
resident in Luxembourg if they have a residence or their customary place of abode
is in Luxembourg. The latter is the case if the individual has been present in
Luxembourg for more than six months. Non-resident individuals are only taxable on
specific Luxembourg-sourced income. In addition to the items listed for non-resident
companies (cf. company tax) the following income is taxable:
• incomefromasalariedactivitycarriedoninLuxembourgorifpaidbytheState
• incomefrompensions:
– if paid by the State or if former activity was carried on in Luxembourg
– if paid by a domestic organisation
– if paid by a pension fund, provided that the contributions were deducted
from income taxable in Luxembourg.
The tax base consists of assessable income less allowable deductions. Assessable
income includes: business income, income from agriculture and forestry, self-
employment, salaried activities, pensions, savings and securities, rental income and
other income including capital gains. Based on administrative practice documented
on 31 December 2010, highly qualified workers which are hired in the international
labour market may, during a five year period, benefit from generous tax exempt
compensations.
Witheffectfrom1January2008,an80%exemptionappliestothebusinessincome
from intellectual property (IP), except copyrights (other than for software), plans,
formulae, trade secrets and similar rights.
Interestearnedbyresidenttaxpayersissubjecttoa10%nalwithholdingtax.
Capital gains are taxable if they derive:

• fromanyassetsheldlessthansixmonthspriortodisposal
• fromthesaleofshareholdingsinLuxembourgcompaniesexceeding10%
• fromthesaleofrealestatelocatedinLuxembourg,exceptthetaxpayer’smain
residence.
Payment of tax: tax on salaries is withheld at source.
Tax is fixed by assessment according to income sources and amounts. Taxpayers pay tax
by quarterly instalments based on income received during the last year of assessment.
Tax rates: system based on marginally increasing rates. The rates quoted below include
a4%surchargefortheemploymentfund.Thesurchargeamountsto6%forincome
above EUR 150,000 for tax classes 1 and 1a) or above EUR 300,000 for tax class 2.
Taxable income (EUR) Marginal rate (class 1)
0 – 11,265 0%
11,265 – 13,171 8.32%
13,171 – 15,077
marginalincreaseof2.08%perslice
ofEUR1,908(1.04%onthelastslice)
Above 41,793 40.56%
Above 150,000 41.34%
• Incomefromthesaleofbusinesses,capitalgainsfromsalesaftersixmonths
of purchase, forestry income, indemnities for injuries, one off payment of
(supplementary) pension benefits (entered into by employee): marginal rate
equals half the tax rate on global income.
• Forestryincomeduetoforcemajeure,capitalgainsfromrealestateirrespective
of date of purchase: marginal rate equals one quarter of the tax rate on global
income (132.3, law 30.7.02).
Luxembourg
PKF Worldwide Tax Guide 20126
Theminimumtaxratefornon-residentsis8.32%exceptforcapitalgainsonreal
estate, where the rate for residents is applicable.
Tax classes: classification depends upon civil status

Civil status Age below
64 on 1 Jan
Age above
64 on 1Jan
Single 1or1a** 1a
Married 2 2
Separated* 1or1a** 1a
Divorced* 1or1a** 1a
Widow* 1or1a** 1a
* Class2remainsgrantedfortheyearthepersonbecomessingleandthethree
following years (119.3.c)
** 1applieswithoutchildren,1awithchildren
• Forclass1,thegeneraltaxratesapply.
• Forclass2,thetotalincomeofbothspousesissplitandeachhalfistaxed
according to class 1.
• Forclass1alowerratesapplywithamaximumadvantageofEUR1,337.
Non-residenttaxpayersmaybenetfromtaxclass2iftheyearnmorethan50%of
professional income in Luxembourg.
Resident taxpayers married to non-residents may benefit from tax class 2 if the
householdearnsatleast90%ofitsprofessionalincomeinLuxembourg(income
earned with EU institutions is not taken into account).
Non-resident individuals may, under certain conditions, elect to be treated as resident
taxpayers. In that case, they are assessed on their worldwide income for income tax
purposes. They would also be entitled to the deductions and allowances available to
resident taxpayers.
TAX CREDITS AND CHILD BONUSES
EUR 300 per year for self-employed persons, employees or pensioners.
EUR 750 for tax payers in class 1a.
There is a monthly bonus of EUR 76.88 per child under the age of 18 or above such
age (max 27 years) in case of students.

Social Security: contributions are indicated in the table below (valid as at
1st January 2011)
Social contributions
in %

Private sector

workers
Civil
servants
Self
employed
persons
Paid by Worker Employer
Illness (white collar workers) 3.05 3.05 2.80 6.10
Illness (blue collar workers) 5.15 3.05 n/a n/a
Pension 8.00 8.00 – 16.00
Accident – 1.15 – 1.15
Old age care 1.4 – 1.4 1.4
Mutual Insurance –
0.62
– 2.38
–
1.48
(optional)
Health check – 0.11 – –
Total
12.45
– 14.55
12.93

– 14.69
4.20 26.13
Notes: A minimum monthly wage applies in Luxembourg. It amounts to EUR
1,801.49 (EUR 2,161.78 for qualified workers). Wages are linked to inflation index
(October 2011 index = 737.83).
Contributions are levied on a base which corresponds to the minimum wage, or the actual
professional income if higher. No contributions are levied on income which is more than
Luxembourg
PKF Worldwide Tax Guide 2012 7
five times the minimum wage. This ceiling does not apply for Old Age care which is also
levied on other income. For salaries a monthly deduction of EUR450.37 applies here.
Inheritance tax: rates vary according to the degree of relationship and value:
Transfer nominal rate
In direct line exempt
Between spouses with / without living descendants exempt/5%
Between sisters and brothers 6%
Between uncles, aunts and nephews or nieces;
between adopter and adoptee
9%
Between granduncles, grandaunts and grandnephews
or grandnieces
10%
Between other relatives and non-related parties 15%
Increasein%ofnominalrate,basedofvalue(EUR10,000)inheritedbyeachheir:
< 1 0% > 4 40% > 15 80% > 50 140% > 100 180%
> 1 10% > 5 50% > 20 90% > 62 150% > 125 190%
> 2 20% > 7.5 50% > 25 120% > 75 160% > 150 200%
> 3 30% > 10 70% > 38 130% > 87 170% > 175 220%
i. treaty and non-treaty witHHoldinG taX rates
Treaties signed with Albania, Argentina, Jersey, Kazakhstan, Kuwait, Kyrgyzstan,

Lebanon, Niger, Oman, Pakistan, Saudi Arabia, Serbia and Montenegro, Seychelles,
Sri Lanka, Syria, Tajikistan, Ukraine and Uruguay are pending.
Dividends
(%)
(1) Interest
(%)
(2) Royalties
(%)
(3)
Non-Treaty Countries: 15 0 0
Austria 15/5/0 0 0/10
Armenia 15/5 10 5
Azerbaijan 10/5 10 10/5
Bahrain 10/0 0 0
Barbados 15/0 0 0
Belgium 15/10/0 15 0
Brazil 25/15 15 15/25
Bulgaria 15/5/0 10 5
Canada 15/5/0 10 0/10
China 10/5 0 10/6
Czech Republic 15/5/0 0 10/0
Denmark 15/5/0 0 0
Estonia 5/10/0 10 5/10
Finland 15/5/0 0 5/0
France 15/5/0 10 0
Georgia 10/5/0 0 0
Germany 15/10/0 0 5
Greece 7.5/0 8 7/5
Hong Kong 10/0 10 3
Hungary 15/5/0 0 0

Iceland 15/5 0 0
India 10 10 10
Indonesia 15/10 10 12.5
Ireland 15/5/0 0 0
Luxembourg
PKF Worldwide Tax Guide 20128
Dividends
(%)
(1) Interest
(%)
(2) Royalties
(%)
(3)
Israel 15/10/5 10/5 5
Italy 15/0 10 10
Japan 15/5 10 10
Korea (South) 15/10 10 10/15
Latvia 10/5/0 10 10/5
Liechtenstein 15/5/0 0 0
Lithuania 15/5/0 10 10/5
Malaysia 5/10 10 8
Malta 15/5/0 0 10
Mauritius 10/5 0 0
Mexico 15/5 10 10
Moldova 10/5 5 5
Monaco 15/5 0 0
Mongolia 15/5/0 10 5
Morocco 15/10 10 10
Netherlands 15/2.5/0 0/2.5/15 0
Norway 15/5 0 0

Panama 15/5 5 5
Poland (4) 15/5/0 0/10 10
Portugal 15/0 10/15 10
Qatar 10/5/0 0 5
Romania 15/5/0 10 10
Russia 15/10 0 0
San Marino 15/0 0 0
Singapore 10/5 10 10
Slovak Republic 15/5/0 0 10/0
Slovenia 15/5/0 5 5
South Africa 15/5 0 0
Spain 15/5/0 10 10
Sweden 15/0 0 0
Switzerland 15/5/0 10/0 0
Thailand 15/5 15/10 15
Trinidad and
Tobago
10/5 0 10
Tunisia 10 10/7.5/0 12
Turkey 20/5 15/10 10
United Arab Emirates 10/5 0 0
United Kingdom 15/5/0 0 5
United States (5) 15/5/0 0 0
Uzbekistan 15/5 10/0 5
Vietnam 15/10/5 10/7 10
1 For dividends, the lower rate is applicable under specific conditions and
generallyiftherecipientholdsatleast25%.ThetaxtreatywithBrazilandthe
UnitedStatesxestheminimumshareholdingat10%.EUDirective90/435/CEE
provides for exemption for qualifying subsidiaries.
2 Rates are for inbound interest only as Luxembourg does not levy withholding tax on

interest. EU Directive 2003/49/EC provides for exemption for qualifying subsidiaries.
3 Rates are for inbound royalties only. Luxembourg abolished withholding tax on
royalties from 1 January 2004.
4 Poland grants full exemption on any inbound dividends from Luxembourg.
5 The‘limitationsofbenetsclause’intheUStreaty(1996)isinmanyaspects
more favourable than in other new US treaties.
Luxembourg
PKF Worldwide Tax Guide 2012 565
www.pkf.com$100