Luxembourg: Views on the Luxembourg tax reform

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Luxembourg: Views on the Luxembourg tax reform

krawczykowski.jpg

Raymond Krawczykowski

Sustainability, justice, selectivity and competitiveness, were the hallmarks of Luxembourg's tax reform approved in December 2016. Amendments and targeted tax rate reductions, for both individuals and corporations, became effective on January 1 2017. The measures should help maintain Luxembourg's competitiveness as a location for companies to do business, but the government should continue to adopt additional tax reform measures to continue its progress.

The gradual reduction of the corporate tax rate, in particular, is welcome. For taxable income exceeding €30,000 ($32,000), the rate in 2017 is 19% (reduced from 21%) and will decrease to 18% in 2018. Thus, for a company located in Luxembourg City with taxable income exceeding €30,000, the tax rate will be 27.08% in 2017 (29.22% in 2016). Taking into account the corporate tax, the municipal business tax and the contribution to the employment fund, the rate for a company in Luxembourg City with taxable income exceeding €30,000 will be 27.08% in 2017 (29.22% in 2016). This rate will fall to 26.01% starting in 2018.

New EU tax rules and international tax guidelines, such as those relating to the OECD's BEPS Project, which was launched to combat tax base erosion and profit shifting, feature prominently in an increasingly globalised world. These measures, which are focused on promoting transparency, consistency and taxation in accordance with economic substance, represent unprecedented changes to the normative framework for taxation. Because taxation is a vector for competitiveness and growth, many are predicting that these changes to the tax rules will increase competition between countries.

If a country is to remain competitive, further reduction of the corporate tax rate should be considered, in addition to other tax measures.

For an example of one such measure, consider a tax regime that benefits intellectual property, such as an IP box regime. These types of regimes, applicable in many countries, including Luxembourg, recently have been abolished in some cases where the regime was not in line with the recommendations under the BEPS Project, with the possibility for companies that benefited from the regime before a certain date with certain conditions to continue under the regime until 2021. Some countries already have adopted new regimes in line with the new international standards. Despite the fact that Luxembourg has not yet taken similar measures, the attractiveness of Luxembourg is extremely high for alternative asset managers. A number of big players in the private equity, infrastructure, and hedge funds world have recently made some announcements about setting up their platform in Luxembourg – both their management entity and their investment funds. In addition, to stable tax policies and full compliance with the OECD tax framework, those fund managers have certainly taken the benefits of EU "passporting" of their funds into account as soon as their platform is registered in Luxembourg. It is, nevertheless, expected that the Luxembourg government should quickly put the announcements made in 2016 concerning additional tax reform into practice. These measures should include, among other items, a greater reduction in corporate taxation and the establishment of a new regime favourable to intellectual property, while respecting the new international tax guidelines.

Raymond Krawczykowski (rkrawczykowski@deloitte.lu)

Deloitte Luxembourg

Tel: +352 451 454 904

Website: www.deloitte.lu

more across site & shared bottom lb ros

More from across our site

Experts from law firm Kennedys outline the key tax disputes trends set to define 2026, ranging from increased enforcement to continued tariff drama and AI usage
They also warned against an ‘unnecessary duplication of efforts’ in UN tax convention negotiations; in other news, White & Case has hired Freshfields’ former French tax head
Awards
Submit your nominations to this year's WIBL EMEA Awards by 16 February 2026
Defending loss situations in TP is not about denying the existence of losses but about showing, through proactive measures, that the losses reflect genuine commercial realities
Further empowerment of HMRC enforcement has been praised, but the pre-Budget OBR leak was described as ‘shambolic’
Michel Braun of WTS Digital reviews ITR’s inaugural AI in tax event, and concludes that AI will enhance, not replace, the tax professional
The report is solid and balanced as it correctly underscores the ambitious institutional redesign that Brazil has undertaken in adopting a dual VAT model, experts tell ITR
The Brazilian law firm partner warns against going independent too early, considers the weight of political pressure, and tells ITR what makes tax cool
The lessons from Ireland are clear: selective, targeted, and credible fiscal incentives can unlock supply and investment
The ITR in-house award winner delves into his dramatic novelisation of tax transformation, and declares that 'tax doesn’t need AI right now'
Gift this article