Corporation Tax and Trade Tax

Information on corporate and trade tax in Luxembourg...

Corporate income tax

Corporate entities (Société Anonyme, Société a Responsabilité Limitée and Sociétés en Commandité par Actions) incorporated under Luxembourg law or having their principal establishment in the Grand Duchy are considered tax resident and subject to corporate income tax (Impôt sur le Revenu des Collectivités - IRC).

The IRC is assessed annually and deducted from the annual net income (profit) from business activities as indicated in the annual accounts of the company. If the income does not exceed €15,000, the maximum tax rate is 20 percent. Otherwise the tax rate is 21 percent. In both cases, there is a 5 percent employment contribution surcharge.

Losses carried forward from previous tax years can be indefinitely offset against profits in order to reduce the income taxation.

In addition, companies are entitled to investment tax credits (bonification d'impôts) to a maximum of 13 percent of the net book value of new investments, 10 percent net of the overall cost of the investment made for vocational training and 15 percent of the gross salary of new staff who were previously receiving unemployment benefits.

Municipal business tax on profit

In addition to the above tax, a company is subject to municipal business tax on profits exceeding €17,500. The municipal business tax rate, which cannot exceed 6.75 percent, varies by commune.

  • For further information from the Grand-Duchy on this tax: Click here (in French)

Parent-subsidiary privilege

Subsidiaries paying dividends to their parent company are exempt from withholding tax on dividends provided the parent company has held at least 10 percent of its share capital over a period of 12 consecutive months or commits to do so in the future. This exemption is also subject to the condition that the undertaking is fully subject to standard corporate income tax in its own country.

Further Information

Information supplied by Tax Advisor, Françoise Naramski, of Prisma Consulting SARL At 41 Zone Industrielle , L-8287 Kehlen Tel: +352 49 62 05 1 / Fax +352 49 62 05 49 Copyright © 2012 Prisma Consulting SARL - All Rights Reserved