Luxembourg Budget 2027: Key Tax Measures

Corporate Tax Measures

A Lower Corporate Income Tax Rate

The standard corporate income tax (“CIT”) rate would fall from 16% to 15% for companies with taxable profits above EUR 250,000 (previously EUR 200,000), and from 14% to 13% for profits up to EUR 200,000 (previously EUR 175,000).

Considering the 7% solidarity surcharge and the 6.75% municipal business tax (“MBT”) in Luxembourg City, the overall tax rate in Luxembourg City would fall from 23.87% to 22.80%. Luxembourg already cut its rate by one point in 2025, so this would be the second reduction in three years, confirming Luxembourg’s sustained efforts to improve its tax competitiveness.

What the Rate Cut Means for International Groups

Several Luxembourg rules compare foreign taxes with half of the Luxembourg CIT rate. A lower Luxembourg rate therefore also lowers these benchmarks:

• Participation exemption for non-EU subsidiaries. Dividends and capital gains derived by a Luxembourg company from a non-EU subsidiary may benefit from the participation exemption, provided, among other conditions, that the subsidiary is subject to a tax comparable to Luxembourg CIT. In practice, the tax authorities consider this condition met where the subsidiary is subject to an effective tax rate of at least half the Luxembourg CIT rate (currently 8%) on a tax base determined under rules similar to those applicable in Luxembourg. This threshold would therefore decrease to 7.5% from tax year 2027. The same threshold also determines whether (i) dividends paid by a Luxembourg company to a parent company resident in a treaty country can be exempt from the 15% Luxembourg withholding tax, and (ii) shareholdings in non-EU subsidiaries can be excluded from the Luxembourg company’s net wealth tax base.
• Controlled foreign company Luxembourg can tax undistributed profits of a foreign company controlled by a Luxembourg company where that foreign company pays less than half the tax it would have paid in Luxembourg. With a lower Luxembourg rate, fewer foreign subsidiaries are likely to fall within these rules and, where they do, the profits would be taxed at the lower rate.
• Global minimum tax. Groups with annual revenue of EUR 750 million or more remain subject to the 15% global minimum tax, which is not affected by the cut. The combined headline rate (22.80% in Luxembourg City) stays well above 15%, but groups that combine the lower rate with tax credits or exemptions should check that their Luxembourg effective rate does not fall below 15%, as any shortfall will be collected as a top-up tax.

Unlimited Tax Loss Carry-Forward

Currently, tax losses incurred before 2017 can already be used without time limit, whereas losses incurred from 2017 onwards may only be carried forward for 17 years. The Bill would remove this distinction for both CIT and MBT purposes, so that losses incurred from 2017 onwards would no longer expire and could be carried forward until fully utilised. Under the current rules, the oldest losses must be used first, meaning that more recent losses may expire before they can be utilised. As a result of the Bill, all tax losses, regardless of when they were incurred, will remain available for offset without any time limitation.

This measure should particularly benefit businesses with extended investment horizons, including holding and investment platforms, real estate developers, infrastructure projects and start-ups, whose profitability may only emerge several years after inception. All other conditions governing the utilisation of tax losses would remain unchanged.

Enhanced Tax Credits for Digital and Green Investment

Businesses that invest in digitalisation (e.g., new IT systems or automation) or in ecological and energy transition (e.g., lower emission equipment or renewable energy installations) can benefit from a tax credit. For qualifying investments and operating expenses, this credit would rise from 18% to 21%. For qualifying equipment and other tangible depreciable assets, which also benefit from the unchanged 12% global investment credit, the additional credit would increase from 6% to 9%, so the combined credit would also reach 21%.

The investments must still satisfy the regime’s existing conditions, including the required certification.

Measures Affecting Investors and Carried Interest Holders

Luxembourg tax resident individuals who sell privately held investments shortly after acquiring them are taxed on the gain as a “speculative gain” at their normal progressive income tax rates (up to 42%, plus the solidarity surcharge). This currently applies to sales within six months of purchase. From 2027, the Bill would extend this window to 12 months.

This affects:

Non-substantial shareholdings (10% or less): Gains on sales made after a six-months period are currently not subject to tax. Under the Bill, a sale made between the seventh and the twelfth month after acquisition would instead be fully taxable at progressive rates. Only stakes held for more than 12 months would remain non-taxable.

Substantial shareholdings (more than 10%): A holding counts as substantial if the seller, alone or together with their spouse or partner and minor children, owned more than 10% of the company, directly or indirectly, at any point in the five years before the sale. Gains on substantial shareholdings are always taxable. However, once the speculation period has passed, they generally benefit from a reduced rate equal to half of the seller’s overall tax rate (a maximum of around 23%). The Bill would push back the date from which this reduced rate applies from six to 12 months.

Non-resident individuals: Non-resident individuals selling a substantial shareholding in a Luxembourg company would be taxed in Luxembourg (in the absence of an applicable tax treaty) if they sell within the 12-months window or, in certain cases, within five years of ceasing to be Luxembourg tax resident.

Luxembourg tax resident carried interest holders: Since 2026, participation-linked carried interest, is not subject to tax if the interest is 10% or less and has been held for more than six months. This holding period would also be extended to 12 months, so carried interest received earlier would be fully taxable.

Administrative Simplification for Employers

Employers would no longer have to file separate named lists of employees receiving a profit-sharing bonus or benefiting from the impatriate regime, since this information already reaches the authorities through payroll data that employers file electronically.

Luxembourg Budget 2027: Next Steps

The Bill remains subject to the Luxembourg legislative process, including review by the Council of State and parliamentary approval. While most of the measures are currently expected to be enacted substantially as proposed, certain amendments may be introduced before the legislation is finalised. We will continue to monitor developments and provide updates as the legislative process progresses.

For further information, please reach out to your usual Maples Group contact or any of the persons listed on this page.