LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
• 14% for taxable income not exceeding EUR175,000; • EUR24,500 plus 30% of the income exceed - ing EUR175,000 for taxable income between EUR175,000 and EUR200,001; or • 16% for taxable income exceeding EUR200,000. CIT applies only to corporate entities listed in Article 159 of the Income Tax Law and does not apply to tax transparent entities (eg, general or limited partner - ships or European economic interest groupings).
The amount of minimum NWT is computed as follows, as from 2025: • a minimum NWT of EUR535 where the total bal - ance sheet is less than or equal to EUR350,000; • a minimum NWT of EUR1,605 where the total bal - ance sheet is greater than EUR350,000 and less than or equal to EUR2 million; or • a minimum NWT of EUR 4,815 where the balance sheet total is greater than EUR2 million. Businesses Owned by Individuals Directly If a business is run directly by an individual (sole pro - prietorship/partnership interest): • the income is taxed at progressive personal income tax rates, up to approximately 45.78% including surcharges; and • social security contributions may also apply. Businesses Owned by Individuals Through Transparent Entities Partners in an SCS or SCSp are taxed personally on their share of the partnership’s income: • corporate partners – corporate tax rates; and • individual partners – progressive personal tax rates. In principle, a transparent entity itself is not subject to tax. The reverse hybrid rules introduced by the second anti-tax avoidance directive (ATAD) also provide that where a Luxembourg tax transparent entity is qualified as a reverse hybrid entity (because it is considered as opaque by the country where the investors are resi - dent, subject to other conditions being met), it shall be subject to CIT on the portion of its net income (that is not otherwise taxed). In addition, it may be subject to MBT, as it is levied on any income generated on a Luxembourg commercial activity, if: • it carries out a commercial activity ( sociétés en commandite simple (SCSs) and sociétés en com- mandite spéciale (SCSps) are not considered to be commercial by nature); or • it meets the “commercial taint” rules (eg, involve - ment of a commercial general partner) – income of
To CIT you must add: • solidarity surcharge; • municipal business tax; and • net wealth tax. Solidarity surcharge
The solidarity surcharge is 7% of CIT for the year 2026 – bringing the aggregate CIT rate to 17.12% (16% rate + (7% x 16%)) for the year 2026 for collective entities whose taxable income is above EUR200,000. Municipal business tax (MBT) The MBT rate varies by municipality, approximately 6.75% in Luxembourg City. Net wealth tax (NWT) NWT applies to resident companies (subject to exemptions for certain companies). It is a state tax levied on the net wealth of companies, charged on their worldwide so-called “unitary value” (generally equal to the net asset value of the company or branch – subject to certain exemptions and adjustments). The NWT rate is 0.5% on that part of the net wealth up to to EUR500 million and 0.05% on that part of the net wealth exceeding EUR500 million. A reduction of the NWT can be requested by an entity in its CIT tax return, provided that it undertakes to enter, before the end of the following year, an amount equivalent to five times the reduction requested in a reserve account and to maintain this reserve in its balance sheet for a five-year period. Luxembourg companies are subject to the higher of either the NWT as per the unitary value or a minimum NWT varying between EUR535 and EUR4,815.
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