Luxembourg Tax Update – 2023 Budget Law

Luxembourg’s 2023 Budget Law introduces several updates across corporate tax, VAT, and employment incentives. Here are the key takeaways for taxpayers and employers:

📌 Extended Filing Deadlines

A long-anticipated technical change: the 2023 law formalises the extended deadline for tax returns. Corporate income tax, municipal business tax, net wealth tax, and personal income tax returns can now be filed up until 31 December (previously 31 March).

📉 VAT Rate Adjustments

To combat inflation and strengthen purchasing power, Luxembourg has lowered three key VAT rates as of 1 January 2023:

• Standard rate: 16% (previously 17%)

• Intermediary rate: 13% (previously 14%)

• Reduced rate: 7% (previously 8%)
  The super-reduced rate of 3% remains unchanged.

💼 Profit-Sharing Bonus – Flexibility for Groups

The profit-sharing bonus regime, first introduced in 2021, allows a 50% exemption on certain employee bonuses (up to 5% of a company's positive results). The 2023 reform now permits companies forming a Luxembourg tax unity to calculate this threshold at the group level, subject to a joint request.

🌍 Impatriate Regime – Lowered Entry Threshold

To enhance talent attraction, the minimum income threshold for access to the impatriate regime has been lowered from €100,000 to €75,000 (excluding benefits). Qualified foreign employees may benefit from partial exemptions on relocation-related costs for up to 8 years.