Landscape of corporation tax in Luxembourg in 2025
The three main taxes payable by companies in Luxembourg are the corporate income tax, the municipal income tax and the net wealth tax. We will see them in detail, but first we will look at the legal texts and entities involved in the subject of corporate taxes in Luxembourg.
Main tax regulations
There are different regulations governing corporate taxation in Luxembourg, these are the main ones:
- Amended law of December 4, 1967 on income tax (LIR): this is the main regulation governing corporate income taxation. This law establishes the basis for corporate income tax by defining how taxable income, allowable deductions and exemptions are calculated. The LIR also regulates other direct taxes applicable to individuals and legal entities such as the Net Wealth Tax (NWT).
- Social Security Code: it establishes the mandatory contributions that companies must make for their employees, including social security, unemployment and pension contributions.
- Amended law of February 12, 1979 concerning value-added tax (TVA): it establishes the different VAT rates and the goods and services that are subject to it.
- EU Tax Directives: Luxembourg, as a member state of the European Union, implements in its legislation various tax-related EU directives, such as the Parent-Subsidiary Directive (Parent-Subsidiary Directive) and the Anti-Tax Avoidance Directive (ATAD). These directives are designed to avoid double taxation, prevent tax evasion and harmonize certain tax aspects within the EU.
- Tax Information Exchange and Compliance Act (CRS and FATCA): Luxembourg has implemented regulations related to the automatic exchange of tax information at the international level such as the Common Reporting Standard (CRS) promoted by the OECD and the Foreign Account Tax Compliance Act (FATCA) in cooperation with the United States.
Bodies involved in corporate taxation in Luxembourg
As for the bodies involved, the main one is the Luxembourg Inland Revenue (ACD), although there are others, let's take a look at them:
- Luxembourg Inland Revenue (ACD: it is the main body in charge of the administration and collection of taxes in Luxembourg. This organization is in charge of collecting Corporate Income Tax, Municipal Income Tax and Net Wealth Tax.
- Registration Duties, Estates and VAT Authority (AED): is responsible for the administration of Value Added Tax (VAT), as well as other taxes related to the registration and ownership of goods.
- Financial Sector Supervisory Commission (CSSF): this is Luxembourg's financial regulator, responsible for supervising the activities of financial institutions and ensuring that they comply with tax and financial regulations.
- Ministry of Finance: this is the body responsible for the formulation and implementation of tax policy in Luxembourg. It works closely with the ACD and other government agencies to propose tax reforms, manage international tax relations and represent Luxembourg in international forums, such as the OECD and the European Union.
- Administrative Court: is the judicial body in charge of resolving tax disputes between companies or individuals and the Direct Tax Administration.
Corporate income tax in Luxembourg
The main tax payable by companies in Luxembourg is the corporate income tax, this tax is a direct tax levied on profits earned by companies in Luxembourg and applies to both resident and non-resident companies. A company is considered as resident when it has its registered office or its effective place of management in Luxembourg and is considered as non-resident when its registered office is not in Luxembourg but the company generates income from Luxembourg sources.
Although both companies are subject to tax in Luxembourg, the taxable base is different in each case:
- Resident companies: the company is taxed on its worldwide income, however, if the foreign income is received in a State linked to Luxembourg by a double taxation avoidance treaty, the foreign income is exempt in Luxembourg if it has been obtained in the framework of a permanent establishment.
- Non-resident companies: When the company is non-resident it is only taxed on its domestic income.
As for the corporate tax rate in Luxembourg, it depends on the taxable income according to the following schedule:
| Name | Total taxable income (euros) | Rate |
| Reduced tax rate | ≤ 175,000 | 15% |
| Transition tax rate | From 175,001 to 200,000 | A flat amount of 26,250 euros, plus an additional 31% applied to the taxable base between 175,000 and 200,000 euros. |
| Standard tax rate | > to 200,000 | 17% |
In addition, all legal entities based in Luxembourg must contribute to the employment fund, so this rate must be increased by 7% in favor of this fund. This increases the normal tax rate from 17% to 18.19%.
Municipal business tax
Another tax payable by companies in Luxembourg is the municipal business tax or MBT. The value of this tax depends on the municipality, in the municipality of Luxembourg it amounts to 6.75%. A tax allowance of 17,500 euros on taxable profits must however be taken into account.
Net wealth tax
Finally, a third tax payable by companies in Luxembourg is the net wealth tax, this tax is levied on the net assets of the company and its rate is as follows:
- 0.5% on the part of the net assets less than or equal to 500,000,000 euros.
- 0.05% on the part of the net assets exceeding 500,000,000 euros.
Recent changes in the law
As for recent changes, it is worth mentioning a change that although it cannot be considered as recent as it has not yet taken place, it will take place very soon.
To the delight of many, this change involves a reduction in taxation for companies, as of January 1, 2025, the corporate income tax (IRC) rate will be reduced by one percentage point. The rate will then drop from 17% to 16% for companies with taxable income over 200,000 euros and from 15% to 14% for entrepreneurs and small companies with taxable income up to 175,000 euros.
How to register for VAT
In Luxembourg, any natural or legal person who independently and regularly carries out transactions linked to economic activities, whatever their purpose or result and wherever they are carried out, must register for VAT.
Let's see then how to register for the collection of the TVA in Luxembourg. The process is quite simple and consists of 3 easy steps:
1. Collect the necessary information
To register as a TVA collector, it is necessary to file an initial declaration or an option declaration. The first step is then to collect all the necessary elements to complete these forms. The following information is required to complete this initial declaration:
- Basic data: Company name, legal structure, address of the registered office, date of incorporation, if applicable, the publication number in the Luxembourg Mémorial C or the Recueil électronique des sociétés et associations (RESA), and the names and addresses of shareholders and directors listed in the company's incorporation documents.
- Bank account details: IBAN and BIC code of a Luxembourgish or foreign bank.
- Start date of the economic activity: it determines when the first VAT return will be due.
- Details on intra-community transactions: An estimate of whether intra-community acquisitions or supplies of goods or services will be made.
- Turnover: estimated annual turnover excluding VAT.
- Documents: a copy of the articles of incorporation in French or German and a copy of the identity document of the partners mentioned in the articles of incorporation and the company directors.
2. Submit the corresponding declaration to the competent tax office.
Once you have all the data at hand, it is necessary to fill out the corresponding forms and submit them to the competent tax office. The form to be completed will depend on whether you are registering for VAT on a mandatory or voluntary basis and on whether the applicant makes intra-community acquisitions (AIC) of more than 10,000 euros per year:
- Mandatory registration: an initial declaration must be filed. However, if the entrepreneur is exempt from registering for TVA purposes but makes intra-community acquisitions (AIC) of goods for an annual amount, excluding taxes, exceeding 10,000 euros, an alternative declaration called initial declaration (AIC) must be filed.
- Optional registration: an optional declaration (AIC) must be filed.
These forms can be submitted either online via MyGuichet.lu, the government’s secure digital platform, or by mail to the Registration Duties, Estates and VAT Authority (AED).
Registration Duties, Estates and VAT Authority (AED)
- Address: 308 Rte d'Esch, Cessange Luxembourg
- Phone: (+352) 24 78 06 24
- Mail: info@aed.public.lu
- Website: pfi.public.lu
- Working hours: Monday to Friday from 8.30 to 12.00 and from 14.00 to 16.00
The available forms include:
3. Receive the VAT Registration Number
Once the submission is processed and approved, the business or individual will be issued a Luxembourg VAT number. This number consists of eight digits, preceded by the country code "LU." The VAT number is essential for all VAT-related transactions, such as invoicing and filing VAT returns.
