COVID-19 - Luxembourg tax authorities’ emergency plan for taxpayers

The Luxembourg government has introduced a series of tax and economic measures to support the economy. The objective of these measures is to alleviate the financing and liquidity needs of Luxembourg companies.

On 17 March 2020, the Luxembourg Tax authorities (LTA) published a newsletter announcing tax measures for Luxembourg corporate taxpayers (Companies).

Direct Taxes

In this respect, Companies that face liquidity issues due to COVID-19 can benefit from a:

Cancellation of the first two quarterly advance tax payments of the year 2020 (due in March and June 2020).

This optional measure covers only corporate income and municipal business taxes.
To benefit from the waiver of these 2020 tax advances, Companies should file a form with the Luxembourg tax authorities (standard form available online).

Alternatively, Companies can still request for a reduction of advance tax payments (without cancelling them).

1. Payment deferral of four months for taxes due after 29 February 2020.

This optional extension exclusively covers corporate income tax, municipal business tax and net wealth tax. However, excluded from the scope of this extension are wage taxes, as well as withholding taxes (e.g. on dividends).

Late interest penalties will arise only after the four months deferral period will elapse.
To benefit from this four months payment deferral, Companies should file a form with the LTA (standard form available online).

This extension is not applicable to taxes that were due before 1 March 2020.

2. Deadline extension for filing company tax returns to 30 June 2020.

Value Added Tax

Luxembourg VAT authorities also announced specific measures:

• All VAT credit balances below EUR 10,000 will be reimbursed by the end of March.
• Non-observance of VAT returns filing deadline will not be sanctioned (until the VAT administration indicates otherwise).

Exceptional measures for shareholders' meeting / board meetings

On 20 March 2020, the Minister of Justice approved a Grand Ducal Regulation introducing flexible solutions for companies in order to hold shareholders meetings and board meetings. In this respect, the Regulation provides that notwithstanding what is stipulated in the articles of association of a company:

• shareholders' meetings can be held without a physical meeting and with remote voting (written or electronic), videoconference, the use of a proxy-holder is allowed in order to hold the shareholder´s meetings;
• board meetings can be held by written circular resolutions or by videoconference or by any other electronic devices as long as it allows to identify the participants.

From a tax perspective, it is always advisable that shareholders´ meetings and board meetings are held in Luxembourg with physical meetings to ensure that there is no discussion about the place of effective management of a Luxembourg company.

However, given the current circumstances of general confinement, this measure is welcomed so as to not block Luxembourg companies from an operational perspective.

Conclusion

In light of the current global health crisis and its direct impacts on the economy, the Luxembourg government has proactively reacted in order to help economic actors. We expect more specific measures to be announced in the coming days. We will keep you posted in this respect.

This article was written by Yacine Diallo. For more information please contact Yacine using the contact details in the right hand column.