Minimum net wealth tax declared unconstitutional

On a decision (n° 00185) on the constitutionality of Luxembourg tax provisions dated 10 November 2023, the Luxembourg Constitutional Court declared the fixed minimum net wealth tax of €4,815 levied on Société de Participations Financières (SOPARFI) to be unconstitutional.

The Constitutional Court found that the fixed minimum net wealth tax violates the fundamental principle of equality before the law: the Court ruled that the fixed tax, which is a derogation to the standard progressive rules on the levying of the minimum net wealth tax, is discriminating against taxpayers being in comparatively similar situations (i.e. taxpayers which would have been subject to an inferior amount of minimum net wealth tax if not solely due the composition of their balance sheet). The Court ruled that, absent a reason for the different treatment, the provision does not take into account the principle of fair contribution to taxes based on a taxpayer's financial capacity and hence violates the constitutional principle of equality.

This ruling represents a landmark decision through which the Luxembourg Constitutional Court interpreted provisions of Luxembourg tax law in favour of taxpayers. A reform of the fixed minimum net wealth tax is hence to be expected to address the question of unconstitutionality raised by the Constitutional Court.

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