The following overview provides a detailed analysis of the corporate tax regime in Luxembourg, focusing on the current rules applicable in 2025. All relevant tax rates, brackets, and surtaxes are summarized to help companies clearly understand their fiscal obligations.
Corporate Tax Structure in Luxembourg (2025)
Luxembourg employs a progressive corporate income tax (CIT) system, meaning the tax rate varies according to the taxable income level of the company. The base currency is the euro (€).
Corporate Tax Rates and Brackets
| Taxable Income (EUR) | Tax Rate (%) |
|---|---|
| €0 – €175,000 | 14% |
| €175,000 – €200,000 | 30% |
| Above €200,000 | 16% |
As shown, the rate increases sharply at the €175,000 threshold and drops again for income exceeding €200,000.
Surtaxes on Corporate Income Tax
In addition to the base CIT, two main surtaxes apply:
| Surtax Type | Rate (%) | Basis / Condition |
|---|---|---|
| Solidarity Surtax | 7% | Applied on the CIT amount |
| Municipal Business Tax (Luxembourg City) | 6.75% | Varies by municipality (rate shown applies to Luxembourg City) |
The municipal business tax rate is specific to each municipality; the table presents the rate applicable in Luxembourg City. Companies established outside the city should consult local tax authorities for their applicable rate.
Assessment Basis
Corporate tax in Luxembourg is assessed on the profits of resident companies and on Luxembourg-source income for non-resident companies. The system is based on the concept of corporate, rather than personal, liability.
Holding Periods
There are no statutory minimum or maximum holding period requirements specified for corporate tax treatment purposes according to current available data.
Illustrative Example: Tax Calculation Process
Suppose a company in Luxembourg City earns €210,000 in taxable income in 2025. Here’s a simplified estimate of how its CIT might be calculated, excluding allowances and deductions for demonstration purposes:
- The first €175,000 is taxed at 14% → €24,500
- The next €25,000 (€175,000 to €200,000) is taxed at 30% → €7,500
- The remaining €10,000 (above €200,000) is taxed at 16% → €1,600
Total CIT before surtaxes: €24,500 + €7,500 + €1,600 = €33,600
If we factor in the solidarity surtax (7% on CIT) and the Luxembourg City municipal business tax (6.75%), the total tax liability will increase accordingly.
Key Features of the Luxembourg Corporate Tax Regime (2025)
- Progressive tax system: The corporate tax rate is not flat—companies with higher taxable income may face differing rates on various income brackets.
- Surtaxes: Both a solidarity surtax and a municipal business tax apply in addition to the standard CIT.
- No published flat rate: The progressive schedule replaces a single rate, making effective rate calculation important for tax planning.
All Corporate Tax Rates and Surtaxes (2025)
| Component | Rate (%) | Notes |
|---|---|---|
| CIT: up to €175,000 | 14% | |
| CIT: €175,000 – €200,000 | 30% | |
| CIT: above €200,000 | 16% | |
| Solidarity surtax | 7% | On CIT due |
| Municipal business tax | 6.75% | Luxembourg City (varies by municipality) |
Pro Tips for Managing Corporate Tax in Luxembourg
- Prepare precise income forecasts to anticipate changes in tax brackets, especially if your taxable income might cross the €175,000 or €200,000 thresholds.
- Always account for municipal business tax; rates differ by municipality, so check with local authorities for your specific obligations if operating outside Luxembourg City.
- Consider the solidarity surtax when forecasting your effective company tax rate, as it directly increases your overall liability.
- Maintain accurate records and consult regularly with your tax advisor to keep up with any legislative updates issued by Luxembourg authorities.
Official Government Source
For the most current information and comprehensive guidelines, consult the official Luxembourg tax authority website: https://impotsdirects.public.lu/
In summary, Luxembourg applies a progressive corporate tax regime with distinct brackets and additional surtaxes that significantly impact the total corporate tax burden. Companies should pay close attention to both state and municipal considerations, and regularly verify tax rules as they evolve. Given Luxembourg’s established status as an internationally respected financial jurisdiction, the details of the tax system are designed to be clear and transparent, but businesses should always validate the latest figures with official resources.