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Tax Information Luxembourg

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A REWARDING TAX CLIMATE FOR BUSINESS AND EMPLOYEES

Luxembourg ranks 15th in the world and 3rd in the EU in terms of the “ease of paying taxes” in a PwC report based on the average tax liabilities and the time required to file tax returns. The “Paying Taxes 2010” study by the World Bank and PwC details the tax rates, focusing on how taxes are applied and the kinds of deductions available. On average, annual corporate tax returns can be completed in Luxembourg in 59 hours. The report also calculates a “Total Tax Rate” which takes all business taxes and compares this to pre-tax profits. By this measure, Luxembourg is ranked the lowest in the EU with a ratio of 20.9% compared to 44.9% in Germany, 57.3% in Belgium and 65.8% in France.

The Total Tax Rates for the EU

Source: PWC, Paying Taxes 2010

Note: The chart shows the TTR for the economies in the EU by type of tax.

Number of hours to comply across the EU

Source: PWC, Paying Taxes 2010

Note: The chart shows the hours to comply for the economies in the EU by type of tax.

Low tax burden (ranking out of 183 economies)

Source: World Bank, PwC

For more go to http://www.doingbusiness.org/Taxes

So not only are tax rates low, but the rules allow for flexibility in consolidating and structuring. For example, holding company structures benefit from zero percent withholding tax and transfer pricing rules are also very business friendly, facilitated by a wide global network of tax treaties. There are also industry-specific rules such as tax breaks for capital gains on intellectual property. Value added tax is 15%, the lowest possible in the EU. As well, employee social charges are very competitive. For example, a recent PwC survey showed a married couple with two children could expect to receive 72% of their gross salary at a total cost of 111% to the employer. This compared to 68%/112% in the UK, 58%/111% in Germany and 48%/149% in France.

A TAX EFFICIENT LOCATION FOR INTERNATIONAL CORPORATE STRUCTURES

Luxembourg maintains a wide network of double tax avoidance treaties with more than 60 countries. Low or zero withholding tax on dividend payments, application of participation exemption rules to dividend income and capital gains made on sale of share holdings or on company liquidation, as well as specific tax incentives on intellectual property income and capital gains make consolidation and management of international or EU-wide corporate structures in Luxembourg a tax efficient endeavor.