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Taxation for Companies in Luxembourg

Taxation for Companies in Luxembourg

The Luxembourg taxation system implies the imposition of the income tax on various incomes earned by natural persons and companies. All taxpayers must be registered with the tax administration authorities in order to pay taxes in the Grand Duchy, however, different rules apply for residents and non-residents when it comes to all levies.

When it comes to companies, the Luxembourg tax rate for corporate entities, it should be noted that these will be imposed the levy on their worldwide profits if they are resident and, on their income generated here if they are non-resident businesses.

Below, our lawyers in Luxembourg explain the main taxes that need to be paid by companies in the Grand Duchy. You can also rely on us for guidance on various taxation matters.

Types of entities subject to the corporate tax in Luxembourg

According to the provisions of the Company Law, there are several types of legal forms a business can take, as follows:

  1. limited liability companies that can be private or public,
  2. private limited liability companies with more than one shareholders,
  3. simplified limited liability companies and European companies,
  4. partnerships limited shares with at a minimum number of two shareholders.

With respect to their taxation in Luxembourg and the tax rate applied on corporate income, there are various documents they need to file in order to have their due amounts calculated.

Our law firm in Luxembourg is at the service of those who want to set up businesses in the Grand Duchy.

The main taxes that need to be paid by companies in Luxembourg

Luxembourg companies are subject to various taxes, among which the most important are:

  • the corporate tax, which is imposed at different rates,
  • the solidarity surtax,
  • the municipal tax.

What should be noted about Luxembourg and the tax rate applicable to corporate entities is that business income tax is imposed at different rates based on the profits generated.

The solidarity surtax, on the other hand, is imposed only on certain companies and it is levied on the amount subject to the corporate income tax in Luxembourg. The municipal tax imposed on companies is levied at communal levels and depends on each municipality.

If you need information on the taxation of companies and the main levies these need to pay in this country, our Luxembourg lawyers can advise you.

Corporate tax rates applicable in Luxembourg

As mentioned above, the Luxembourg tax rate applicable to corporate entities depends on the income generated by a business during a financial year. Here are the main rates:

  • companies with profits below 175,000 euros per year are levied at a rate of 15%,
  • companies with profits of more than 200,001 euros are imposed with a tax rate of 17%,
  • to these rates, an additional 7% is imposed as a contribution to the employment fund,
  • the 7% solidarity surcharge is imposed to companies with profits exceeding 200,001 euros.

When it comes to the municipal tax, in Luxembourg City, its rate is set at a rate of 6.75%, however, as mentioned above, other municipalities impose different rates.

Our lawyers in Luxembourg can offer detailed information on the lax legislation applicable in the Grand Duchy.

Tax filing requirements for companies in Luxembourg

In order to correctly impose the Luxembourg tax rate on corporate legal forms, these are required to comply with various requirements, among which filing tax returns with the Inland Revenue.

In order to compute the amount due, the Inland Revenue must receive the following financial documents from Luxembourg companies:

  • balance sheets,
  • profits and loss accounts,
  • information on the fixed assets and depreciations,
  • financial statements.

It is possible for the tax authorities to request other information from certain companies in order to clarify any corporate tax-related matter.

Tax incentives for companies in Luxembourg

Luxembourg is a very appealing investment destination, as apart from the low corporate tax compared to other European states, it also offers various incentives. Most of them come under the form of investment incentives like:

  • research and development,
  • audio-visual operations,
  • protection of the environment,
  • professional training for employees,
  • recruitment of unemployed people.

A Luxembourg company can obtain an 8% tax credit on new investments worth at least 150,000 euros and another 2% on the following investments worth 150,000 euros in tangible assets that are subject to depreciation.

For detailed information on the Luxembourg tax rate imposed on corporate entities, you can contact our lawyers. We are also at your service if you want to set up a business in this country.