Overview of the 2023 Luxembourg and German Tax Landscape

ADMIN / December 29th

Dear clients,
What have we learned from the 2023 tax year and the interplay between the new Luxembourg and German tax provisions on investment funds?

Several tax laws have been passed this year, but not all of them have had (direct) implications for the Luxembourg fund sectors. At AIQUNITED, our main objective is to provide you with the most relevant tax information for your business. Among the laws implemented in 2023, the Luxembourg legislator started off the year with the introduction of the Luxembourg Budget Law 2023, which provides clarification on the condition of hybridity of a Luxembourg partnership (see our newsletter Update as of 23 December 2022. Adoption of the Luxembourg Draft Law on the 2023 Budget). The legislator then proceeded with implementing a new tax compliance obligation in Luxembourg by introducing a new Form 205 (see our newsletter Luxembourg Reverse Hybrid Rule and the New Form 205). We recently assisted in a fundamental decision of the Luxembourg Constitutional Court, which unexpectedly declared the Luxembourg minimum net worth tax imposed on Luxembourg corporations unconstitutional, potentially reducing the tax burden on some Luxembourg Soparfi structures in Luxembourg (see our newsletter
Incompatibility of the Minimum Net Worth Tax of EUR 4,815 with the Luxembourg Constitution).

In the area of German taxation, which will likely also have an impact on Luxembourg, the Protocol signed between Germany and Luxembourg amending their double tax agreement provides essential clarifications on key points. Firstly, regarding German cross-border commuters who will now be able to benefit from a de minimis rule of 34 days per calendar year for homeworking. Secondly by introducing the German Real Estate Investment Trust (“REIT-AG”) into the double tax agreement and the restriction to benefit from the maximum taxation of dividends of 15%, the extension of the scope of exit taxation and the prevention of opportunities for non- or low taxation in cross-border transactions (please see our newsletter Germany and Luxembourg Sign Protocol of Amendment to the Double Tax Treaty). The 2023 fiscal year ended for us with the draft law on the Growth Opportunities Act and Minimum Taxation Directive Implementation Act, which includes major changes and implications for Luxembourg investment fund structures with possible effects for the new year to come.

This is a summary of the main tax changes we have come across this year for the investment fund industry in Luxembourg. The AIQUNITED team is excited to continue providing you with updates on the tax implications of new Luxembourg and German legislations/case laws for your business in 2024. We would also be happy to continue supporting you in your business endeavors.

We would like to express our gratitude to all our valued clients for placing their trust in us throughout the year.

We wish you a happy and prosperous New Year 2024!

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