TAX NEWS - 2010

Luxembourg Tax: Chamber of Commerce contribution challenged

New proposals to amend and restructure the Luxembourg Chamber of Commerce (COC) contribution were presented to the Conseil d'Etat (Council of State) on 24 June 2010. The legality of the contribution, which is levied on all Luxembourg taxpayers that carry on commercial, financial or industrial activities in Luxembourg, has been challenged frequently over the last few years, with the Administrative Tribunal and Administrative Court both ruling that COC contribution assessments issued under the current rules were invalid.

The COC contribution is levied annually at a rate that ranges from 0.025% to 0.02% on the taxpayer's profits as determined for corporate income tax purposes (i.e. the taxable base of the second tax year preceding the year of collection but before the deduction of any losses carried forward). The contribution can be as high as EUR 200,000 for some companies.


Administrative decisions

As a result of several administrative decisions in 2007 in which Luxembourg Chamber of Commerce contribution assessments were held to be invalid because they were based on regulations implemented by the Luxembourg Chamber of Commerce itself and not on the basis of a Grand-Ducal Regulation (GDR), the Luxembourg legislator adopted the GDR of 21 December 2007, which governs the modalities of the Luxembourg Chamber of Commerce contribution. However, the Administrative Court of Appeal ruled on 15 June 2010 that the Luxembourg Chamber of Commerce contribution for 2008 and 2009 should be deemed to be illegal because the 2007 GDR was introduced on "emergency" grounds and, thus, without consultation with the Conseil d'Etat. The Administrative Court ruled that the emergency adoption of the GDR was not justifiable.


Legislative reaction

The recent proposal submitted to the Conseil d'Etat aims to clarify certain general aspects of the Luxembourg Chamber of Commerce contribution by implementing these under a specific law without prescribing all the details of the operation of the contribution. The GDR governing the structure of the COC contribution is likely to be further amended with a view to review by the Conseil d'Etat, which would legitimize the contribution. In this case, COC contribution assessments would then be payable.


Conclusion

The legality of the Luxembourg Chamber of Commerce contribution remains a volatile and uncertain issue and contributions due for 2010 and 2011 are already the subject of public debate mainly because of the lack of certainty. While it is likely that the proposal presented to the Conseil d'Etat will be amended before it is finalized, the recent decision of the Administrative Court of Appeal likely will motivate the parliament to act and restore clarity and security for affected taxpayers.