Communal business tax

This page was last modified on 11-05-2017

Communal business tax (ICC) is a tax levied only on the profits of commercial companies. It is not levied on the entrepreneur personally.

Its purpose is to help communes finance their expenses and specifically additional costs engendered by businesses established in the commune (provision of industrial zones, parking spaces, special measures to protect the natural environment, etc.).

It is set and collected by the Luxembourg Inland Revenue (ACD) on behalf of the communes, based on the taxpayer's declaration.

Forms / Online services

Carry out your procedure:

  • With an online service

    • Corporate income tax (Income tax, Business tax 2014, Net wealth tax 2015) - online service
    • Corporate income tax (Income tax, Business tax 2015, Net wealth tax 2016) - online service
    • Corporate income tax (Income tax, Business tax 2016, Net wealth tax 2017) - online service
  • By downloading a form

    • Impôt des collectivités - déclarations et annexes

Who is concerned

Communal business tax is levied on commercial businesses located in Luxembourg :

  • sole proprietors who make an operating profit;
  • partnerships which make an operating profit:
    • partnerships (sociétés en nom collectif – SENC);
    • limited partnerships (société en commandite simple – SECS);
    • civil companies (société civile);
    • de facto companies (société de fait).
  • capital companies, regardless of the nature of their business:
    • public limited companies (sociétés anonymes – SA);
    • limited liability companies (sociétés à responsabilité limitée – SARL);
    • European companies (sociétés européennes – SE);
    • partnerships limited by shares (sociétés en commandite par actions – SECA);
    • Luxembourg permanent establishments of foreign companies in respect of their business in Luxembourg only.

Communal business tax does not apply to:

  • sole proprietors of agricultural and forestry businesses;
  • the liberal professions.

How to proceed

How the tax is calculated

Communal business tax (ICC) is based on the following formula:

ICC = general tax base x base rate x communal rate

The tax base is determined and the business tax is collected by the Luxembourg Inland Revenue (ACD) on behalf of the communal tax inspectors.

How the tax base is determined

The business or company determines its taxable profit.

The starting point for the calculation is business profit, as determined relative to income tax (or corporate income tax).

The following are added to business profit:

  • profits and salaries attributed to general partners for managing partnerships limited by shares (SECA);
  • losses incurred in:
    • a partnership;
    • a permanent establishment abroad.

The following are deducted from business profit:

  • shares of profit in:
    • a partnership;
    • a permanent establishment abroad;
    • dividends allocated based on an equity holding of at least 10 % in:
      • a resident capital company;
      • a fully taxable non-resident capital company;

Dividends exempted owing to the parent-subsidiary regime are not subject to communal business tax.

Tax allowance

The allowance applies to the following only:

  • sole proprietors;
  • partnerships.

The amount of the allowance is as follows:

  • EUR 40,000 for taxpayers not subject to corporate income tax;
  • EUR 17,500 for others.

The allowance is automatic and not subject to specific conditions or formalities.

Applicable rates

The base rate is stipulated by law. It is 3 %.

The tax base calculated in this way is then multiplied by the communal rate to determine the business tax due. The communal rate is set by each commune based on its financial needs and generally ranges from 200 % to 400 %.

Commune
(example)

Multiplying factor

Communal business tax rate (natural persons)

Communal business tax rate (companies)

Max rate: income tax + communal business tax (natural persons)

Overall rate: corporate income tax + communal business tax (capital companies – scenario without distribution)

Esch/Alzette

275 %

7.62 %

8.25 %

46.62 %

29.25 %

Luxembourg

225 %

6.32 %

6.75 %

45.32 %

27.75 %

Troisvierges

300 %

8.25 %

9 %

47.25 %

30 %

Declaration

The communal business tax return is different:

  • for natural persons;
  • for corporate entities; it is included in the corporate income tax return and varies depending on whether they are resident or non-resident entities.

The declarant may:

Tax payments

Tax payments are made by provisional advance instalments based on the following schedule:

  • 10 February;
  • 10 May;
  • 10 August;
  • 10 November.

The balance is payable on receipt of the tax bulletin.

Who to contact