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December 21, 2023

Luxembourg Parliament adopts law implementing the EU Minimum Tax Directive

  • On 20 December 2023, the Luxembourg Parliament approved the legislative proposal (Draft Law) for transposition into domestic law of Council Directive 2022/25231 of 14 December 2022 on minimum taxation (Minimum Tax Directive).
  • The next step in the legislative process is the waiver of the second parliamentary vote by the State Council and the publication in the Official Gazette. These steps are expected to occur before year-end.

Executive summary

On 20 December 2020, the Luxembourg Parliament voted and adopted the Draft Law2 as recently amended3 by the Luxembourg government.

The Draft Law aims at implementing the Pillar Two Global Minimum Tax rules as laid down in the Minimum Tax Directive. The Minimum Tax Directive introduces minimum effective taxation of 15% for large multinational enterprise (MNE) groups and large-scale domestic groups with annual revenues of at least €750m in at least two of the last four financial years. It sets forth a system consisting of two interlocked rules — the primary Income Inclusion Rule (IIR) and the secondary Undertaxed Payment Rule (UTPR), together referred to as the Global anti-Base Erosion (GloBE) rules. In addition to introducing the IIR and the UTPR, the Draft Law makes use of the option provided in the Minimum Tax Directive to introduce a Qualified Domestic Minimum Top-up Tax (QDMTT), allowing Luxembourg to collect top-up tax on the excess profit of a low-taxed Luxembourg entity that is part of an in-scope group.

Through the various amendments tabled by the government, the Draft Law now also incorporates guidance and options that were agreed at the level of the Organisation for Economic Co-operation and Development (OECD) /G20 Inclusive Framework through Agreed Administrative Guidance on the GloBE Model rules (Pillar Two) in February 20234 and July 2023.5

After the State Council issued its opinion on the Draft Law, the Luxembourg Finance Commission made certain linguistic adaptations that were formally requested by the State Council. These amendments, however, do not materially change the provisions of the Draft Law.

It is expected that the final law will be published in the Official Gazette (Mémorial A) before year-end and will be effective as from 31 December 2023. The IIR applies for financial years starting on or after 31 December 2023 and the UTPR applies for financial years starting on or after 31 December 2024. If an MNE's Ultimate Parent Entity is in a jurisdiction that, pursuant to the Minimum Tax Directive, delays implementation of the IIR, the UTPR will apply for financial years starting on or after 31 December 2023. The QDMTT will become effective for financial years starting on or after 31 December 2023.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Advisory Services Sàrl, Luxembourg City

Ernst & Young LLP (United States), Luxembourg Tax Desk, Chicago

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor



1 Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the European Union.

2 See EY Global Tax Alert, Luxembourg enacts new reporting regime to combat VAT fraud, dated 18 August 2023.

3 See EY Global Tax Alert, Luxembourg updates draft legislation on implementation of the EU Minimum Tax Directive, dated 20 November 2023

4 OECD (2023), Tax Challenges Arising from the Digitalisation of the Economy — Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), OECD/G20 Inclusive Framework on BEPS, OECD, Paris.

5 OECD (2023), Tax Challenges Arising from the Digitalisation of the Economy — Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), July 2023, OECD/G20 Inclusive Framework on BEPS, OECD, Paris.


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