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It's been five years since the last elections! The next social elections for companies with more than 15 employees will take place on 12 March 2024. While the process is set out in detail in a draft ministerial decree, it's important to remember that there are a lot of things that need to be done, requiring resources, time, and technical skills.

Recent decisions rendered by the Court of Justice of the European Union (“CJEU”) seem to have put an end to investigations of the European Commission (“EC”) into tax measures of the Member States based on the state aid rules. In particular, certain tax rulings granted by the Luxembourg tax authority (“LTA”) to Fiat, Engie and Amazon groups have been characterised by the EC in the past as conveying illegal selective tax advantages. Ultimately, CJEU decisions rendered in these cases found the tax rulings not to constitute unlawful state aid.

On 20 December 2023, draft law no. 8292 (“Draft Law”), transposing the EU Council Directive 2022/2523 of 14 December 2022 (“Pillar Two Directive”) into Luxembourg national law, was adopted by the Luxembourg Parliament (the “Law”). The Law aims to ensure that multinational enterprise (“MNE”) groups and significant large domestic groups pay a minimum level of tax of 15%. It incorporates amendments proposed by the Luxembourg Government in November 2023 in order to be aligned with administrative guidance issued by the OECD.

On 22 December, the Administration de l’enregistrement, des domaines et de la TVA (“AEDT”) has issued circular no 781-1 on VAT on directors’ fees.

The law of August 7, 2023 on non-profit associations and foundations was published in the Official Journal on September 19, 2023 and come into force since September 23, 2023. It applies to newly created non-profit organisations and foundations from this date.

On 12 September 2023, the European Commission adopted the proposal for a directive “Business in Europe: Framework for Income Taxation. BEFIT aims to introduce a single set of rules applicable to determine the corporate income tax base of multinational enterprises in all EU Member States as well as a simplified transfer pricing approach for assessing intercompany transactions. In the words of the EC, the Proposal is motivated by reduction of tax compliance costs for large, cross-border businesses in the European Union.

STATEC has confirmed, on Wednesday 30 August, the triggering of a new salary indexation as from 1 September 2023.

On 4 August 2023, the Luxembourg Government introduced to the Luxembourg Parliament the draft law no. 8292 (the "Draft Law"), aimed at implementing the provisions of the European Union (“EU”) Council Directive 2022/2523 of 14 December 2022 (the “EU Pillar Two Directive” or the “Directive”). In line with the Directive, and in order to ensure that large multinational enterprise (“MNE”) groups and significant large domestic groups pay a minimum level of tax, the Draft Law introduces three new taxes into Luxembourg national law.

As stated in the March tripartite agreement, a new tax credit, the “Crédit d'Impôt Conjoncture” (economic tax credit) will increase salaries retroactively from January 2023.

On 13 July 2023, the Luxembourg Government presented the draft law no. 8276 to the Luxembourg Parliament. The Draft Law proposes changes to the current investment tax credit regime by increasing the rates of the global ITC and introducing a new ITC for investments and expenses related to the digital transformation and the ecological and energy transition. The proposed measures are planned to apply as from tax year 2024.

On 30 June 2023, the Luxembourg tax authority issued the updated guidance in form of an FAQ (the “Guidance”) on the law implementing the EU Directive on the mandatory disclosure rules and exchange of cross-border tax arrangements (“DAC 6”). The Guidance contains welcome clarifications concerning hallmarks C1 and E3, as well as an explanation regarding the notification obligations of persons covered by the legal professional privilege.

On 30 March 2023, Luxembourg Administrative Tribunal (the “Tribunal”) rendered a decision denying the use of carried forward tax losses to a Luxembourg company (“LuxCo”) based on the abuse of law provision (the “Decision”). The case concerned tax losses dating from a period during which LuxCo was a holding company, and which it intended to use after a number of years of being a dormant company in order to offset capital gain realised from the disposal of immovable property.

On 9 June 2023, the Luxembourg tax authorities (“LTA”) issued a circular L.I.R. n°168quater/1 (the “Circular”) clarifying the application of the reverse hybrid rules, as provided for in article 168quater of the Luxembourg Income Tax Law (“LITL”). Additionally, a FAQ on the related tax form 205 was published, detailing the tax compliance obligations of reverse hybrid entities.

Advocate General Juliane Kokott challenged the European Commission’s claim that Luxembourg provided unauthorized state aid to Amazon through tax advantages. In her Opinion on Amazon case (C-457/21), the AG highlights the critical flaws in the Commission’s approach, as well as supports the annulment of the Commission’s decision by the General Court. Nevertheless, the final judgment rests with the Court of Justice of the European Union.

The European Union finance ministers have reached a political agreement on the updated compromise text for the draft Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation. The DAC8 Directive, among other, introduces tax transparency rules for crypto-assets and extends the automatic exchange of advance cross-border rulings, under certain conditions. It is expected to be formally adopted in early June 2023.

Further to the decision of the General Court in the Engie Cases, Engie and Luxembourg appealed before the CJEU. In her Opinion delivered on 4 May, AG Kokott suggests that the CJEU should uphold the appeals, set aside the judgment of the General Court and annul the decision of the EC.