Luxembourg Tax Measures 2025

For businesses and entities

Simplified minimum net wealth tax

This modification amends the minimum Net Wealth Tax (NWT) provisions following the Luxembourg Constitutional Court's decision on 10 November 2023 (Case No. 00185) declaring the fixed NWT amount of EUR 4,815 unconstitutional.

The fixed NWT amount of EUR 4,815 is replaced by a progressive NWT scale based on the company’s total balance sheet:

• EUR 535 for a total balance sheet ≤ EUR 350,000;
• EUR 1,605 for a total balance sheet between EUR 350,001 and EUR 2,000,000;
• EUR 4,815 (cap) for a total balance sheet > EUR 2,000,000.

Shares buyback codified

The Luxembourg Income Tax Law formally enshrines the tax treatment of shares buyback, in line with existing practice and subject to usual anti-abuse provisions. The cancellation of an entire class of shares will qualify as a partial liquidation not subject to withholding tax if the following conditions are met:

• The entire class of shares is cancelled within six months after repurchase;
• The different share classes were established at incorporation or during a capital increase;
• Each share class has distinct economic rights as defined in the Articles of Association (or any document referred to therein); and
• The redemption price reflects the shares’ fair market value and should be determinable based on the Articles of Association (or any document referred to therein).

Opt-out regime for the participation exemption

An opt-out mechanism from the participation exemption regime is introduced for investments qualifying solely based on their acquisition price thresholds. 

This opt out mechanism will also be available for the 50% exemption on dividend income.

Decrease of the corporate income tax rate

The corporate income tax rate is reduced by one percentage point from 17% to 16%. The aggregate rate of corporate income tax, the employment surcharge and the municipal business tax applicable in Luxembourg-city is therefore reduced from 24.94% to 23.87%.

Amendment to the interest deduction limitation rules

The definition of single entity group (groupe à entité unique) is introduced it being a taxpayer that is not part of a consolidated group for financial accounting purposes and is not formally considered a stand-alone entity. 

This single entity group will be allowed to deduct, upon request, the entirety of its exceeding borrowing costs, provided that it can demonstrate that the ratio between its equity and its total assets is equal to or greater than the equivalent ratio of the single-entity group.

Other

Additional amendments have also been introduced for private wealth management companies (SPFs), actively managed Luxembourg ETFs qualifying as UCITS and certain tax compliance obligations which must now be filed electronically. 

For employees and individuals

Simplification of the tax regime for inpatriates

The existing regime is replaced by a simplified system granting a 50% exemption on gross annual remuneration of inpatriates, capped at EUR 400,000, with other conditions remaining essentially unchanged.

Boost of the profit-sharing scheme (prime participative)

Introduced on 1 January 2021, the profit-sharing scheme allows employers to distribute a portion of their annual profits to employees as a supplementary benefit. This benefit qualifies for a 50% tax exemption under certain conditions.

Thresholds applicable to this regime are now increased as follows:

• the yearly profit that can be shared by an employer increases from 5% to 7.5%; and
• the payment that an employee can receive increases from 25% to 30% of the employee’s gross remuneration (before incorporation of benefits in cash / kind).

New bonus for young employees (prime jeune salarié)

A new measure allows certain employees to benefit from a 75% tax exemption on bonuses ranging from EUR 2,500 to EUR 5,000, depending on their gross annual remuneration. To benefit of this exemption, the employee must be under 30 years old, in his/her first open-ended contract in Luxembourg and receive a gross annual remuneration below EUR 100,000.

Other

Additional measures have been voted, including revised personal income tax brackets and a new tax credit for overtime performed by cross-border workers.