Enlighten your future Partial reconsideration of the wealth tax by the Constitutional Court
Partial reconsideration of the wealth tax by the Constitutional Court
In a statement No. 00185 of November 10, 2023, the Constitutional Court considered that point 2) a) of the paragraph 8 of the amended law of October 16, 1934 was not in conformity with the Constitution.
As a reminder, the paragraph 8 of the amended law of October 16, 1934 concerning the wealth tax, called “Vermögensteuergesetz”, abbreviated “VStG”, in its version resulting from the modification of December 23, 2016, which has remained applicable since then provides that :
“(1)
The wealth tax due for a year amounts to
a) in case if the taxable wealth is less than or equal to 500,000,000 euros at 5 per thousand ;
b) in case if the taxable wealth is more than 500,000,000 euros, the sum of 2,500,000 euros increased by the difference between the taxable wealth and 500,000,000 euros multiplied by 0.5 per thousand.
(2)
By way of derogation from paragraph 1, the wealth tax due by resident taxpayers covered by § 1, paragraph 1, number 2 and by § 3, paragraph 1, numbers 4, 5, 9 and 10 is set at :
a) 4,815 euros minimum when the sum of financial assets, debts on related companies and on companies with which the taxpayer has a participation, transferable securities and bank assets, postal check account balances, checks and cash exceeds 90% of the balance sheet total and 350,000 euros.
By financial assets, debts on related companies and on companies with which the taxpayer has a participation, securities and bank balances, assets in postal check accounts, checks and cash, we mean assets which are or would be recorded in accounts 23, 41, 50 and 51 of the standardized chart of accounts. For the purposes of this letter, shares held in joint ventures in general are assumed to be recorded in accounts 231 and 233 of the standardized chart of accounts ;
b) 535 euros minimum when the balance sheet total is less than or equal to 350,000 euros,
1,605 euros minimum when the balance sheet total is more than 350,000 euros and less than or equal to 2,000,000 euros,
5,350 euros minimum when the balance sheet total is more than 2,000,000 euros and less than or equal to 10,000,000 euros,
10,700 euros at least when the balance sheet total is more than 10,000,000 euros and less than or equal to 15,000,000 euros,
16,050 euros at least when the balance sheet total is more than 15,000,000 euros and less than or equal to 20,000,000 euros,
21,400 euros minimum when the balance sheet total is more than 20,000,000 euros and less than or equal to 30,000,000 euros,
32,100 euros minimum when the balance sheet total is more than 30,000,000 euros.
By balance sheet, we mean the balance sheet established in accordance with the provisions of the amended law of December 4, 1967 concerning income tax.
By balance sheet total, we mean the total of the last closing balance sheet of the tax year which precedes the key date of the wealth tax base. […]”.
To make its decision, the Court based itself on :
- the principle of equality of the Luxembourgers before the law provided for by the article 15 of the revised text of the Constitution considered that point 2 a) of paragraph 8 of the amended law of October 16, 1934 infringed this principle of equality before the law.
- The principle of contribution to tax according to the contributory faculties of the taxpayer
The Court considers that the threshold of 350,000 EUR fixed in point 2) a) of paragraph 8 of the amended law of October 16, 1934 is not rationally justified, and that thus the said provision ignores the contributory faculty of the taxpayers covered by this provision.
It therefore declares point 2) a) of paragraph 8 of the amended law of October 16, 1934 not in conformity with the constitution from July 1, 2023.
The Court specifies that while awaiting a new law on this subject, it will therefore be necessary to apply point 2) b) of paragraph 8 of the amended law of October 16, 1934 each time it is more favorable for the taxpayer than point 2) a).
This decision therefore impacts companies with a total balance sheet more than 350,000 EUR and not exceeding 2 million euros, as well as financial assets (financial assets, debts on related companies and on companies with which the taxpayer has the participation, securities and bank assets, assets in postal check accounts, checks and cash) exceeding 90% of their total balance sheet.
In such a case, the minimum net wealth tax should apply at EUR 1,605 (instead of EUR 4,815) in accordance with point 2) b) of the paragraph 8 of the amended law of October 16, 1934.
