On 10 November 2023, the Luxembourg Constitutional Court partly quashed certain provisions of the net wealth tax regime in Luxembourg.
Under the existing legislative framework, Luxembourg resident companies were notably subject to the minimum net wealth tax based on their balance sheet as follows:
(a) a minimum net wealth tax of EUR 4,815 applied for certain financial holding companies that had on their books, predominantly some cash deposits, financial assets and transferable securities that were cumulatively in excess of (i) 90% of their total balance sheet and (ii) a threshold of EUR 350,000.
(b) the other companies were subject to a progressive net wealth tax contingent on their total balance sheet, which progressive net wealth tax varied from EUR 535 (for a company with a balance sheet up to EUR 350,000) to EUR 32,100 (for a company with a total balance sheet exceeding EUR 30 million).
The constitutional court examined the progressive and minimum net wealth tax regime and ruled that the minimum net wealth tax resulted in an unjustified difference in treatment between taxpayers that breached the principle of equal treatment.
This ruling impacts notably the financial companies having a balance sheet of up to EUR 2 million with financial assets and holdings exceeding 90% of their total balance sheet. A net wealth tax of EUR 1,605 will apply to such companies pending a legislative change. The Luxembourg legislator is required to revisit the legislative framework on net wealth tax and one would hope that after a decade past the enactment of such provision, regards shall continue to be had to the competitiveness of Luxembourg as a regional and global financial centre. Pending the legislative amendment, please don’t hesitate to reach out for any queries on the above, to assess your situation on a case-by-case basis and where appropriate, to consider filing a claim for a refund.
LL.M. tax, Leiden University
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