On 15 December, the Parliament passed the 2023 budget law including:
Several new tax measures for individuals, among others, broadening the scope of the impatriate tax regime and the participative premium
An extension of the filing deadline for corporate and individual tax returns from 31 March to 31 December
An extension of the scope for the reduced and super-reduced VAT rates
Last but not least, a modification of reverse hybrid rules under art. 168quater of Luxembourg income tax law effective as from tax year 2022, whereby, for instance, investors which do not qualify as associated enterprises or which benefit from a subjective tax exemption would not be impacted by those rules
Our Luxembourg tax alert gives you more information.
Individual Tax Measures
Cross-border workers
While the freezing of the 25% social security threshold impacting cross-border workers has been extended until 30 June 2023, the tax ceilings are applicable again since last July 2022.
For 2023, said tax ceiling should be:
Belgium: 34 days;
France: 34 days;
Germany: 19 days.
Company cars
Any company cars other than those registered before 2022 or those registered in 2022 with a leasing contract signed before 31 December 2021 will suffer new rates in order to determine the monthly benefit in kind reportable in the payroll. As a reminder, here is an overview of the applicable rates in 2023:
VAT Update
New VAT Circular 812
On 6 December 2022, the Luxembourg VAT authorities published Circular n°812 on the setting up of new temporary VAT rates for 2023. This circular reminds that the standard, the intermediary, and the reduced VAT rates will respectively be 16%, 13% and 7% between 1 January and 31 December 2023. In this respect, the Luxembourg VAT authorities also underline that it is important to pay attention to the taxable event of the supply to determine the correct VAT rate applicable. Have a look at our VAT alert for more information.
VAT in the digital age (VIDA) package
On 8 December 2022, the European Commission published new reform proposals aimed at setting up an EU VAT system “fit for the digital age”. The package includes one directive (Proposal for a Council Directive amending Directive 2006/112/EC as regards VAT rules in the digital age[1]) and two regulations (Proposal for a Council Regulation amending Regulation (EU) n° 904/2010 as regards the VAT administrative cooperation arrangements needed for the digital age[2] and Proposal for a Council implementing Regulation amending Regulation (EU) n°282/2011 as regards information requirements for certain VAT schemes[3]). These series of measures aim at modernizing the existing EU VAT system and help the fight against carousel fraud increased by the development of the platform economy.
These proposals include as important points:
The setting up of a new real time digital reporting system based on e-invoicing
Updated VAT rules for the platform economy (passenger transport and short-term accommodation)
Single VAT registration for businesses selling to consumers across the EU (on the model of the one stop shop - OSS)
More details on this will follow in the coming weeks.
Your CSSF (tax) audit might be coming in 2023!
Tax fraud was defined as a criminal and predicate offence in 2017 and the Luxembourg regulator CSSF has addressed to financial actors the Circulars Nos. 17/650 and 20/744, with 30 tax indicia to comply with the current legal framework.
With its November press release on the latest on-site inspections, the CSSF made very clear what they expect in terms of risk assessment, documentation and controls, with respect to the implementation by supervised entities of the above mentioned Circulars.
Many (tax) audits are expected to be performed by the Luxembourg regulator in 2023. Be prepared, as the CSSF will be even more focused on this area (See our for Blog for more)!
WHT Reclaim
EU law has been affecting the European tax environment for many years, and its consequences for the investment fund industry cannot be underestimated. During the year of 2022, there have been observations of several court cases being rendered by the Court of Justice of the European Union (CJEU), confirming the existing violation of the free movement of capital pursuant to article 63 Treaty of Functioning of the European Union. These decisions led several domestic courts, for example in Italy, Finland, and Portugal, to issue positive decisions for the non-resident claimants, validating the jurisprudence of the CJEU. In 2023, it is expected that other countries may follow, like Germany, where the German Supreme Court will render its decision as to whether its legislation applicable before 2018 is in breach of EU law. If the decision is positive this could lead to reimbursements of billions of EUR in favor of foreign investment funds including 6 percent of late interest per annum.
The CJEU invalidates certain DAC6 notification obligations
On 8 December 2022, the CJEU gave its decision in a case concerning compatibility with EU law of the requirement for intermediaries, who are subject to legal professional privilege (LPP), to notify other intermediaries of their reporting obligation under the EU mandatory disclosure rules (DAC6).
The CJEU held that the notification obligation is invalid in light of the fundamental rights guaranteed by the Charter of Fundamental Rights of the European Union - specifically the right to respect for communications between a lawyer and his or her client. The Euro Tax Flash from KPMG's EU Tax Centre can give you more details.
It will be interesting to see what changes this decision will generate to the notification obligations under DAC6 more generally. Member States will have to revisit these provisions to ensure compliance with the CJEU decision. We will of course keep you posted in this regard.
It is worth noting that the same situation applies to the EU fifth Anti-Money Laundering Directive (AMLD) as a result of the recent decision of the CJEU (22 November 2022), which invalidates the AMLD provisions on general public access to the ultimate beneficial ownership (UBO) register. Luxembourg immediately reacted to this decision by restricting the access to the UBO register.
DAC 7 Transposition Law (Bill No. 8029)
Bill No. 8029, which aims at implementing the DAC7 into Luxembourg law is undergoing the legislative process.
Once adopted, the DAC7 law will require digital platform operators to provide the Luxembourg competent authority with information about certain users (“sellers”) on their platform, to enable such competent authority to exchange this information with other EU Member States.
To comply with DAC7, the transposition law must be adopted by 31 December 2022, and the rules should be applied from 1 January 2023.
