On 19 December 2020, the Luxembourg Parliament voted into law the Budget Act 2021 (the "Budget Act"). In the unprecedented context of COVID-19, the main objectives of the Budget Act are to ensure a swift revitalization of the economy, secure businesses regardless of their size, and maintain employment and household spending power. Other goals, such as taking steps towards greater tax fairness and further improving the attractiveness of Luxembourg, are also reflected in the Budget Act. The introduction of a new real estate tax applicable to certain investment funds (UCIs, SIFs and RAIFs) investing locally, the repeal of the circular providing for a simplified valuation method for warrants and stock option plans, and the encouragement of sustainable investment through the introduction of a reduced subscription tax for UCIs (both Part I and Part II funds) are the main drivers in this respect.
With regard to improving the attractiveness of Luxembourg and retaining highly qualified employees in the country, the Budget Act improves on the current tax regime applicable to "impatriates" and introduces a 50% tax exemption for employee participation bonuses. Finally, the Budget Act amends the tax unity regime in order to comply with the decision of the Court of Justice of the European Union ("CJEU") of 14 May 2020 (C-749/18).
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