2023 Luxembourg Budget Law adopted

On 15 December 2022, the Luxembourg Parliament (Chambre des Députés) approved the bill n°8080 on the 2023 budget including certain tax measures. The main takeaways are as follows.

Reverse hybrid mismatch rules

The article 168quater of the Luxembourg income tax law (“LITL”) is modified to include a clarification regarding the conditions to be met for the reverse hybrid mismatch rules to apply. In particular, one of the conditions is that the jurisdiction of the Luxembourg non-resident holder(s) of interest in the Luxembourg tax-transparent entity must treat the latter as fiscally opaque. In that respect, the amended version of article 168quater LITL makes clear that the non-taxation of the net income that a Luxembourg non-resident holder of interest realizes through a Luxembourg tax fiscally transparent entity considered as tax opaque in its jurisdiction should result from this difference in qualification (i.e. transparency vs. opacity). In practice, this means that the Luxembourg non-resident holder(s) of interest, which are tax exempt in their country of residence, should not be affected by the reverse hybrid mismatch rules.

Extension of the deadline for the filing of tax returns

The paragraph 167.(3) of the Luxembourg general tax law (Abgabenordnung) is amended to formalize the administrative tolerance to file both the personal income tax and the corporate income tax returns until the 31 December, instead of the current legal deadlines of 31 March for individual taxpayers and 31 May for corporate taxpayers. This measure will apply as from the fiscal year 2022.

RELIBI

RELIBI refers to the withholding tax, introduced by the law of 23 December 2005 as amended, on savings income in the form of interest payment made by paying agents to beneficial owners who are Luxembourg resident individuals (“RELIBI Law”). In this context, the definition of paying agent is completed to clarify that a paying agent must be a professional of the financial sector acting in the course of its normal economic activity and to limit the scope of application of RELIBI to public savings (contrarily to?interest payments between private parties as isolated transactions).

Should you need further insight, get in touch with Gérard Neiens, Jean-Philippe Monmousseau, or Grace Mfuakiadi.