On 27 May 2025, Draft Law No. 8546 was submitted to the Luxembourg Parliament (Chambre des Députés) (the “Draft Law”) to introduce several changes in the tax landscape. It notably updates the rules on exchange of information following the recent ECJ ruling, allowed legal forms for the private wealth management company and an update to the tax credit for single parents.
EU exchange of information on demand and lawyers’ legal privilege
Under the Draft Law, Luxembourg tax authorities receiving a request of information from another EU Member State will not be allowed to issue an injunction decision against a Luxembourg lawyer to share information held on a third party, to the extent the lawyer is acting within the framework of is profession, in judicial representation or as advisor.
This amendment follows the European Court of Justice (“ECJ”) decision in case C-432/23 dated 26 September 2024 delivered following a request for preliminary ruling from the Luxembourg Higher Administrative Court. The ECJ found that requiring lawyers to disclose all client communications for EU tax information exchanges constitutes unjustifiable interference with lawyer-client privilege protected under Article 7 of the EU Charter of Fundamental Rights (for more details on the case, please refer to our October 2024 Newsletter). The Higher Administrative Court delivered its decision on 12 December 2024 and disregarded the contentious domestic legislation.
The Draft Law intends to amend the Law of 25 November 2014 providing for the procedure applicable to the exchange of information upon request in tax matters. The State Council requested an update of the Draft Law to extend the scope of the exclusion beyond the EU framework and revise the rules governing domestic exchange of information. In its opinion, delivered in the context of the ongoing legislative process, the Luxembourg Bar Association considers that the ECJ ruling should also apply to requests for information to lawyers under domestic legislation.
Under the Draft Law, the limitation only applies to lawyers falling within the scope of the Law of 10 August 1991 on the profession of lawyer and is not intended to apply to other professionals benefiting from a legal privilege.
Additional legal form for the private wealth management company
The private wealth management company (société de gestion de patrimoine familiale) is a tax-exempt vehicle dedicated to holding financial assets of private individuals and assimilated structures.
The Draft Law intends to add, as an authorized legal form, the simplified joint stock company (société par actions simplifiée). Currently allowed legal forms include the public limited company (société anonyme), private limited company (société à responsabilité limitée), the partnership limited by shares (société en commandite par actions), and the cooperative company organized as a public limited company (société coopérative organisée sous forme d’une société anonyme).
Participative bonus: single annual communication to the tax authorities
The participative bonus is a partially tax-exempt remuneration paid to employees that depends on the employer’s profit (see our July 2024 Newsflash on recent changes to the regime).
Under current legislation, the employer must inform the Luxembourg tax authorities each time a participative bonus is put at the disposal of the employee. The Draft Law proposes to implement, as from fiscal year 2025, a one-time communication by employers to the Luxembourg tax authorities of all the beneficiaries of the bonus. The list must be communicated before 1st March of the year following the payment.
Tax credit for taxpayers with children under joint parental authority and alternating residence
Taxpayers living with at least one child are entitled to a tax relief under Article 123 of the Luxembourg income tax law (“LITL”). The entitlement of single parents with joint parental authority and alternating residence was updated in 2024 and in certain case both parents would have to agree on the beneficiary of the tax relief. The situation was considered unsatisfactory as recently split couples could have difficulties agreeing on the beneficiary and technical hurdles prevented the split of the tax credit. Thus, a motion was voted by the parliament in 2024 to provide relief to the second parent.
To provide temporary relief to the second parent not eligible to the above-described measure, the Draft Law extends the tax credit under Article 123bis LITL for fiscal years 2025 and 2026. This tax credit is ordinarily granted to the taxpayers supporting their children during the two years following their departure from the household and depends on the taxpayer’s income with a maximum amount of EUR 922,5.
Administrative cooperation in the context of land tax reform
The Draft Law implements a secured exchange of information between the Luxembourg tax authorities and the Land Registry and Topography Administration to allow the latter to maintain up-to-date information on real estate data.
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