LUXEMBOURG Trends and Developments Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
• at least EUR10,000; • below 30% ownership per investor; and • within a cumulative cap of EUR1.5 million per start- up (only counting eligible investors). The Start-Up Tax Credit equals 20% of the eligible investment, capped at EUR100,000 per investor per Although the rules are strict, the credit represents a meaningful step towards enhancing Luxembourg’s start-up ecosystem. It should encourage early-stage equity financing, attract new angel investors, and complement emerging support structures for entre - preneurs. The measure fits into a broader governmen - tal strategy to diversify the economy and stimulate innovation-driven growth. Furthermore, in addition to the specific tax regime for impatriates as well as the profit participation regime already in place, the government announced the introduction of a new tax regime for stock option plans granted to employees of start-up companies. DAC9 and Pillar Two Reporting: Increased Compliance Expectations Implementation of the DAC9 framework On 17 December 2025, Luxembourg adopted the DAC9 Law, which aligns domestic rules with EU Direc - tive 2025/872 and complements the existing Pillar Two Law enacted in late 2023. DAC9 introduces a dedicat - ed framework for the GloBE Information Return (GIR), a standardised OECD aligned reporting obligation for multinational enterprise (MNE) groups and large-scale domestic groups (LSDGs). This development reinforc - es Luxembourg’s commitment to transparency and international co-operation, reflecting an overall EU- wide trend towards harmonised reporting of effective tax rates and top-up tax liabilities. Standardised GloBE Information Return (GIR) Under DAC9: • the GIR must be prepared using a standardised template; • reporting entities must disclose the jurisdictions to which the GIR must be automatically exchanged; and year (with potential carry forward). Implications and expected impact
• the GIR complements, rather than replaces, domestic filings under the Income Inclusion Rule (IIR), Undertaxed Profits Rule (UTPR) or Qualified Domestic Top-Up Tax (QDMTT). In other words, even where a centralised GIR is filed by an ultimate parent entity abroad, Luxembourg con - stituent entities may still have separate tax payment obligations domestically. Local versus centralised filing Luxembourg entities are exempt from local filing only if: • the UPE or designated filing entity submits a com - pliant GIR in a jurisdiction with a qualifying compe - tent authority agreement; and • the Luxembourg entity notifies the Luxembourg direct tax authorities accordingly. Should exchange of information fail, the entity must file locally within one month of notification. This rule ensures that Luxembourg ultimately receives the infor - mation required to monitor Pillar Two compliance. Transitional simplified reporting For fiscal years starting before 1 January 2029 and ending before 1 July 2030, Luxembourg entities may elect simplified jurisdictional reporting for countries where no top-up tax arises. This temporary simpli - fication aims to ease the transition to full Pillar Two implementation. Automatic exchange of information Information contained in the GIR will be exchanged automatically following a structured “dissemination” approach based on jurisdictions’ respective taxing rights. The first exchanges, covering tax years start - ing on or after 31 December 2023, will occur on 31 December 2026. Rectification and penalty regimes DAC9 introduces detailed procedures for correcting manifest errors and establishes penalty thresholds – including sanctions up to EUR300,000 for misuse of exemptions. This underscores the importance of accurate reporting and proactive compliance, par -
299 CHAMBERS.COM
Powered by FlippingBook