Tax & Account support

Tax

Classification of taxes

Tax is a compulsory, financial levy on the income, resources or goods of natural or legal persons. It is used to finance public expenditure.

There are several types and classes of taxation, for which the rates can vary depending on the legal form of the company.

General principles of company taxation

Companies must fulfil their tax obligations, irrespective of whether the taxes levied are direct or indirect, or whether it is a tax or duty.

In Luxembourg, 3 departments are responsible for enforcing tax legislation:

  • The Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA – AED);
  • The Luxembourg Inland Revenue (Administration des contributions directes – ACD);
  • Where applicable, the Customs and Excise Agency (Administration des douanes et accises).

Who is concerned

Any natural or legal persons pursuing a commercial activity in Luxembourg are liable for tax. All companies established in Luxembourg, regardless of their legal form, are subject to Luxembourg taxation and the general principles applicable thereto.

Preliminary steps

The company must be registered with the competent tax authorities:

  • The Registration Duties, Estates and VAT Authority (Luxembourg);
  • The Luxembourg Inland Revenue (Administration des contributions directes – ACD);

Principles to be followed by companies

Companies subject to taxation must comply with the following principles:

  • To draw up a complete and accurate tax return: in general, any tax or VAT returns completed by the company must reflect reality. These require accurate and regular accounting on the part of the company. Tax fraud, certain forms of tax evasion and, more generally, tax abuse are punishable under Luxembourg law;
  • To pay taxes in accordance with deadlines: if a company does not pay its tax by the specified deadline, the competent tax authorities may increase the amount to be paid.

Accounting

Approving accounts on eCDF

All Luxembourg businesses are, in principle, required to produce annual accounts in accordance with the standard chart of accounts (SCA).

After the close of the financial year, businesses must:

  • Prepare and approve their accounts in electronic format on the platform for electronic gathering of financial data (Plateforme électronique de Collecte des Données Financières – eCDF);
  • Before filing them electronically with the trade and companies register (registre de commerce et des sociétés – RCS).

The structured and standardised financial data will be archived and stored in an electronic balance sheet database by the Central Balance Sheet Unit (Centrale des bilans).

Some businesses are not subject to the SCA – specifically, persons established as sole traders, partnerships (SENC) and limited partnerships (SECS) with an annual turnover of less than EUR 100,000 excl. VAT – and can file their accounts online with the RCS without having to use the eCDF.

Who is concerned

The prior approval of accounts on the eCDF platform is mandatory for:

  • Any business subject to the Standard Chart of Accounts (SCA);
  • As well as for all financial holding companies (Soparfi) which are not preparing accounts under IFRS.

Businesses which are not subject to the SCA (or any Soparfi using IFRS) may directly file their accounts electronically with the RCS without using the eCDF platform.

Standard chart of accounts

The standard chart of accounts, ‘SCA’, (plan comptable normalisé – PCN) ensures that all businesses apply the same accounting structure. It thus:

  • Reduces businesses’ reporting requirements vis-à-vis the authorities;
  • Simplifies the analysis of their financial situation by partners (auditors, banks, suppliers, etc.).

In principle, Luxembourg businesses must keep their accounting records in accordance with the standard chart of accounts.

Who is concerned

All Luxembourg businesses which are required to produce annual accounts must publish their accounts in accordance with the SCA.

The following businesses however are not subject to the SCA:

  • Sole traders and partnerships (SENC, SECS) with a turnover of less than EUR 100,000 excluding VAT (subject to approval from the Minister of Justice);
  • Special limited partnerships, whatever their turnover (subject to approval from the Minister of Justice);
  • Credit institutions;
  • Insurance and reinsurance companies;
  • Sepcavs (société d’épargne-pension à capital variable – pension fund company with variable capital);
  • Sicavs and financial holding companies whose activities are limited to investing in transferable securities or acquiring holdings;
  • Temporary business associations and participating business associations;
  • Companies which, following the approval of the Minister of Justice, can prepare their accounts according to International Financial Reporting Standards (IFRS) or other standards.

Using the standard chart of accounts

Luxembourg businesses are not obliged to use the SCA structure for the purposes of their internal accounting, in particular if they have:

  • Their own chart of accounts;
  • Or a chart of accounts used within a group to which they belong.

However, they must produce their accounts in accordance with the SCA if they wish to:

  • Prepare and approve the accounts in electronic format on the ‘platform for the electronic gathering of financial data’ (Plateforme électronique de Collecte des Données Financières – eCDF);
  • And then file them electronically with the trade and companies register (RCS) for publication purposes.