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Luxembourg

9 June 2021

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Luxembourg Provides Guidance on Deduction of Certain Professional Costs

The Luxembourg Administration of Direct Tax has published Circular L.I.R. n° 105/2 of 4 June 2021, which provides guidance on the deduction of costs for professional activities. Key points of the guidance regarding equipment costs include the following:

  • Costs for professional equipment are fully deductible if used exclusively or almost exclusively (at least 90%) for the professional activity;
  • If equipment is used for both professional and private purposes, a breakdown must be prepared to allocate a non-deductible portion of the cost attributed to private use;
  • In any case, no deduction is allowed for equipment if there is only minor professional use of the equipment (10% or less) or when there is no clear and easy separation of the private and professional use of the equipment; and
  • For computers and software, in particular, the deduction of costs is limited to cases of exclusive or almost exclusive use for professional activities, without the possibility for attributing costs between professional and private use.

Guidance is also provided for other costs, including expenditure relating to the maintenance of a home office (workspace). Such expenditure is deductible only if used exclusively or almost exclusively for professional activity, with a pro-rata allocation of costs related to the building or dwelling as a whole, such as rent, interest expense, repair and maintenance costs, utility costs, etc. It is also provided that a home office (workspace) must be a separate room, with the partial assignment of a room for professional activity not accepted for deduction purposes.

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