LUXEMBOURG Trends and Developments Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
• be an individual Luxembourg tax resident or assimilated non-resident; • not be an employee or founder of the start-up; • invest directly in and hold, directly, new fully paid- up shares in a start-up entity; • invest at least EUR10,000; and • hold the shares for at least three years without interruption. Under the current draft law, investments made through partnerships or businesses do not qualify. If the shares are sold or the company is liquidated within three years, the tax benefit may be revoked, except in cases such as bankruptcy or the investor’s death or disability. The company receiving the investment must: • be a Luxembourg resident company or a perma - nent establishment of a collective entity estab - lished in an EEA member state; • be less than five years old at the end of the tax year; • employ fewer than 50 people and have total assets or annual turnover under EUR10 million; and • be engaged in innovative activities, with at least two full-time contributors and R&D expenses mak - ing up at least 15% of operating costs in one of the last three years. Under the current draft law, certain sectors are excluded, such as law firms, real estate companies, and publicly traded entities. On 17 June 2025, the Luxembourg Council of State reviewed the proposed law that would introduce the Start-Up Tax Credit. While supportive of the initiative’s goal, the Council raised several objections that must be addressed before the law can move forward. The Council notably questioned whether the law’s strict eligibility rules might discourage investment rather than promote it. They suggested that the current requirements could limit the law’s effectiveness in supporting innovation. For example, the law currently requires that investments be fully paid by the end of the calendar year. The Council argues this measure may be too restrictive and could limit start-ups’ ability to raise funds when needed. They recommend allow -
ing a 12-month window from the time of investment instead. A major concern is the exclusion of investments made through fiscally transparent entities (like partnerships). The Council is of the view that this creates unfair treatment between investors who invest directly and those who use such structures, potentially violating the constitutional principle of equality. Similarly, the law bars employees from claiming the tax credit in the year they work for the start-up, even though they can invest and work the following year. The Council argues this restriction is unfair, especially since other types of contributors like consultants are allowed. Once amended and approved by the Council of State, this measure, aligned with broader EU trends, aims to encourage private capital to support innovation and entrepreneurship. For HNWIs, it offers a structured and tax-efficient way to participate in early stage growth companies. The new impatriate regime: attracting global talent Luxembourg has revised its impatriate regime that aims at attracting and retaining skilled foreign workers. The reform, enacted by the Law of 20 December 2024 and effective from the 2025 tax year, simplifies eligi - bility and enhances benefits of the previous regime. The objective of the new regime is to enhance Lux - embourg’s competitiveness in attracting and retaining highly skilled professionals by simplifying the eligibility conditions and increasing the clarity and predictability of the tax benefits. The reform also aligns Luxembourg with more competitive EU jurisdictions by simplifying access to tax relief for skilled foreign workers. The impatriate regime provides for a 50% exemp - tion on gross annual remuneration (including bene - fits in kind), capped at EUR400,000 per annum. This replaces the previous partial exemption on impatriate bonuses and relocation costs. The regime applies until the end of the 8th tax year following the year during which the impatriate starts to work in Luxembourg. This means that the impatriate may benefit from the new regime the year in which individual relocates to Luxembourg and the full eight fiscal years thereaf - ter. Employees who have benefitted from the previ - ous impatriate regime, applicable up to and includ -
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