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Chapter 28 – Exercises & Cases

Multiple Choice Questions​

  1. Luxembourg's standard corporate income tax rate is: a) 15% b) 17% c) 19% d) 20% Answer: b) Luxembourg's standard corporate income tax rate is 17%.

  2. Municipal business tax in Luxembourg City is: a) 6.0% b) 6.75% c) 7.0% d) 7.5% Answer: b) Municipal business tax in Luxembourg City is 6.75%.

  3. The effective combined tax rate in Luxembourg City is approximately: a) 20% b) 24.94% c) 25.69% d) 30% Answer: b) The effective combined tax rate in Luxembourg City is approximately 24.94%.

  4. Tax filing deadline for corporate tax is: a) 5 months after year-end b) 7 months after year-end c) 9 months after year-end d) 12 months after year-end Answer: b) Tax filing deadline is 7 months after fiscal year-end.

  5. Investment allowance for qualifying investments is up to: a) 5% b) 8% c) 10% d) 15% Answer: b) Investment allowance is up to 8% for qualifying investments.

  6. R&D tax credit rate is up to: a) 10% b) 15% c) 20% d) 25% Answer: c) R&D tax credit rate is up to 20%.

  7. Deferred tax assets arise when: a) Accounting expenses exceed tax deductions b) Tax deductions exceed accounting expenses c) Revenue is recognized for accounting before tax d) Tax rate increases Answer: b) Deferred tax assets arise when tax deductions exceed accounting expenses.

  8. Transfer pricing rules require: a) Related parties to charge market rates b) Arm's length pricing c) Cost-plus pricing only d) No pricing restrictions Answer: b) Transfer pricing rules require arm's length pricing.

  9. Tax losses can be carried forward for: a) 5 years b) 10 years c) 20 years d) Unlimited (with conditions) Answer: d) Tax losses can be carried forward unlimited with conditions.

  10. IP Box regime offers reduced tax rate of: a) 3% b) 5% c) 8% d) 10% Answer: b) IP Box regime offers 5% tax rate on qualifying IP income.

Questions​

  1. Explain Luxembourg's corporate tax structure. What are the components of the combined tax rate?

  2. What tax deductions and allowances are available to SMEs in Luxembourg?

  3. How does municipal business tax work? Why do rates vary by municipality?

  4. What are the tax filing requirements and deadlines in Luxembourg?

  5. Explain deferred tax assets and liabilities. When do they arise?

  6. What tax incentives are available for SMEs in Luxembourg? How can businesses access them?

  7. What is transfer pricing? When do transfer pricing rules apply?

  8. How can businesses minimize their effective tax rate legally in Luxembourg?

  9. Explain the difference between accounting profit and taxable profit.

  10. What documentation is required for transfer pricing compliance?

Note: Complete solutions are available in the solutions manual.

End of Chapter 28 Exercises