With an eye on the constant evolution of the international tax environment, we’re summarizing the latest national and international developments relevant for the sector.
2022 budget law
The 2022 budget law confirms that the corporate income tax rates will remain unchanged in 2022. The current legislation regarding inter alia the tax rates, taxable income, incentives, credits, use of tax losses, will remain in force. In this context, there should be no changes in the taxation of companies in the maritime sector which are generally subject to corporate income tax at a rate of 18.19% but exempt from municipal business tax (6.75% – Luxembourg City).
The future of Luxembourg’s maritime sector and the new Luxembourg Government Commissioner for Maritime Affaires
According to Luxembourg’s Minister of Economy, the Luxembourg government wants to attract shipping companies that use or engage in research and development of sustainable vessels – thus promoting a green shipping orientation for the Luxembourg fleet.
On 15 December 2021, the Luxembourg Government Council approved the appointment of André Hansen as the new Government Commissioner for Maritime Affairs, effective 1 May 2022.
Tax treaty developments in Luxembourg
Luxembourg has a network of 90+ double tax treaties – and counting. In 2021, the government signed new double tax treaties with the Republic of Rwanda, Ethiopia and Ghana, which have not yet entered enforcement.
Updates on existing tax treaties:
- Russia: Amendments signed on 6 November 2020, update the withholding tax rate on some dividends payments and entered enforcement on 5 March 2021.
- Kuwait: Amendments signed on 25 March 2021 are in line with the most recent BEPS provisions introduced in the Luxembourg Parliament on 28 July 2021. This treaty and its protocol were ratified on 17 December 2021.
- Botswana: The tax treaty with Botswana, signed on 19 September 2018 entered enforcement on 6 July 2021.
BEPS 2.0 update
On 8 October 2021, the OECD Inclusive Framework (IF) on base erosion and profit shifting released details of an agreement which refines their statement of 1 July 2021.
In the October release, it became clear that the agreed global minimum tax rate is 15% (not “at least 15%”). In addition, the special tax rules for the shipping industry that were proposed in the July agreement, as well as the formulaic substance-based carve-out, were both included in the October release. The Euro Tax Flash from our EU Tax Centre contains more information about this.
On 20 December 2021 the OECD published the Pillar 2 Model Rules. Pillar 2 is still in development, and further guidance in the form of commentary and detailed implementation framework are expected in the first half of 2022.