Luxembourg 2021 Budget Law - introducing “taxe d’abonnement” reduction
19/01/21
In brief
On 17 December, 2020, the Luxembourg Parliament voted to approve the 2021 Budget Law (Bill n°7666) which became the Law of 19 December, 2020 (published in the Mémorial A N° 1061 on 23 December, 2020).
Its provisions include a number of measures that amend or extend the tax legislation, including a new opportunity of “taxe d’abonnement” reduction that will apply to investment funds investing in sustainable activities as defined by the taxonomy (Regulation (EU) 2020/852).
In detail
In order to orient capital flows towards sustainable activities, the Law introduces “taxe d’abonnement” reduced rates for the portion of net assets that is invested into assets that comply with the Taxonomy. This regulation establishes a framework of EU-recognised criteria that defined sustainable activities*.
In principle, the annual base rate of the “taxe d’abonnement” is 0.05% of net assets under management of a retail share class of an investment fund.
The new reduced “taxe d’abonnement” rates are as follows:
Percentage of net assets of the fund or compartment invested in sustainable assets |
Subscription tax rate (annualised) applicable to element of net assets that are sustainable |
Over 5% |
0.04% |
Over 20% |
0.03% |
Over 35% |
0.02% |
Over 50% |
0.01% |
This portion (of the net assets invested in sustainable activities) and the percentage corresponding to this portion in relation to the total net assets of the fund must be included in the fund’s annual report or in an assurance report. The certification made by the independent auditor is based on the fund’s net assets held on the last day of the fund’s financial year.
The above investment level percentages will also need to be formally certified by an auditor through a certificate which must be transmitted to the indirect tax authorities (i.e. Administration de l’Enregistrement, des Domaines et de la TVA) together with the first subscription tax return following the issuance of the fund’s annual / insurance report. This percentage will serve as a basis to determine the rate of the “taxe d’abonnement” applicable to the portion of the net assets invested in sustainable activities for the four quarters following the transmission of the certificate to the indirect tax authorities.
* “Sustainable” assets are those as defined in Art. 3 Regulation (EU) 2020/852.
In conclusion
The introduction of this measure confirms the commitment of the Luxembourg government to promote sustainable finance globally.
The measure also helps investment managers to increase the performance of their products while investing into sustainable assets.
