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Corporate Tax in Luxembourg

Corporate Tax in Luxembourg

Doing business or being employed in Luxembourg implies paying various taxes. In the case of companies, the tax on corporate income is the main levy applicable, while workers are subject to the tax on personal income. Each are levied at different rates.

Currently, the Luxembourg corporate tax rate is one of the lowest in Europe and the European Union which makes the small country very attractive for foreign investors.

Below, our lawyers in Luxembourg explain how the corporate tax applies in the Grand Duchy. We are at your disposal with various services, including business registration and tax legislation advice.

Corporate residence in Luxembourg

Even if the Luxembourg corporate tax rate is rather low one, it is important to note that not all companies can benefit from it under the same conditions, as taxation here depends on the residency of the taxpayer. This principle applies to both businesses and individuals living in the Grand Duchy.

In the case of companies, corporate residency implies businesses that have are registered here and those that have a management or central administration in Luxembourg. These will be imposed the corporate tax on their worldwide income. For companies that do not meet any of the two requirements, the tax will be levied on the income generated locally. This is often the case of branch offices of foreign companies operating in Luxembourg.

The management place principle implies the following:

  • companies with offices where director board meetings occur;
  • companies with offices where general annual meetings of the shareholders occur;
  • companies with offices where accounting books and records are maintained;
  • companies with offices from where the business is controlled.

If you need guidance in determining how the tax legislation applies to your company, our law firm in Luxembourg is at your service.

The corporate tax in Luxembourg and how it is levied

Companies subject to the corporate tax in Luxembourg must know that there are several rates that apply. The determination of the rate depends on the profits they generate, however, there are also a few other levies that need to be considered.

Here are the main rates at which the Luxembourg corporate tax apply:

  • companies with a taxable income below 175,000 euros will be imposed the standard rate of 15%;
  • companies with profits ranging between 175,000 euros and 200,001 euros will pay 26,250 euros plus 31% of the tax base for incomes exceeding 175,000 euros;
  • companies with profits exceeding 200,001 euros will be imposed with a corporate tax rate of 17%.

In Luxembourg city, the corporate tax can reach a total rate of 24.94% as there is also a solidarity surcharge of 7%, plus a municipal business tax of 6.75%. However, this last levy has different rates for companies operating in towns located around Luxembourg city.

It should ne noted that transparent enterprises – general and limited partnerships and European Economic Interest Groups – are not subject to the corporate tax in Luxembourg.

If you need more information on the Luxembourg corporate tax rate and how it is applied, our specialists can guide you. We can also provide information on the solidarity surcharge and the municipal business tax that needs to be paid.

The net wealth tax in Luxembourg

A few years ago, aside from the corporate tax, a net wealth tax was imposed on companies in Luxembourg. This is known as the net wealth tax and it is computed based on an annual assessment, as it follows:

  • the minimum amount to be paid is 4,815 euros and it applies to certain companies;
  • a rate of 0.5% applies on a net wealth base of 500 million euros;
  • a rate of 0.05% applies on net wealth base of more than 500 million euros.

The tax base for the Luxembourg net wealth tax is the assets held by companies.

With respect to the Luxembourg corporate tax rate, you can obtain detailed information from our local law firm. We can also assist with registration with the tax authorities and obtaining VAT and EORI numbers when setting up a business in the Grand Duchy.

Corporate tax administration in Luxembourg

In order to determine the corporate tax in Luxembourg, a business must file various tax accounting documents based on the assessment of their profits during a financial year.

The financial year in Luxembourg is the same as the calendar year, which means that financial statements must be filed by the 31st of May of the current year for the previous one. Also, starting with 2017, all financial papers must be filed in electronic format.

If you need a detailed guide on the Luxembourg corporate tax rate, we are at your disposal, so do not hesitate to contact us.