Doing Business in Luxembourg

Luxembourg

Luxembourg offers a range of tax incentives and advantages for businesses and individuals. Here are some key tax incentives in Luxembourg:

Corporate Income Tax (CIT) Rate:

The standard corporate income tax rate in Luxembourg is 24.94%. However, companies can benefit from reduced rates or exemptions through various tax incentives.

Intellectual Property (IP) Regime:

Luxembourg has an attractive IP regime that allows for favorable tax treatment of income derived from intellectual property rights. Under certain conditions, 80% of qualifying IP income can be exempt from taxation, resulting in an effective tax rate of 5.84%.

Participation Exemption:

Luxembourg applies a participation exemption regime for dividends and capital gains derived from qualifying shareholdings. Under this regime, income from qualifying shareholdings can be fully or partially exempt from corporate income tax, subject to specific conditions.

Notional Interest Deduction (NID):

Luxembourg introduced the NID regime, which allows companies to deduct a notional interest rate on their risk capital from their taxable income. This deduction aims to provide tax relief on equity financing and encourage investment in Luxembourg.

Research and Development (R&D) Incentives:

Luxembourg provides various incentives to support R&D activities. These include tax credits for eligible R&D expenses, as well as specific grants and subsidies offered through the National Research Fund (FNR) and other institutions.

Holding Company Regime:

Luxembourg has a favorable tax regime for holding companies. Dividends and capital gains derived from qualifying shareholdings can benefit from an exemption or reduction in taxation, subject to specific conditions and holding period requirements.

Luxembourg Special Limited Partnership (SLP):

The SLP is a unique investment vehicle in Luxembourg that allows for tax transparency. Investors in an SLP are taxed at their personal level, rather than at the partnership level, providing potential tax advantages for certain investment structures.

Double Taxation Treaties:

Luxembourg has an extensive network of double taxation treaties with many countries, which aim to prevent double taxation and provide tax relief for cross-border activities. These treaties often reduce or eliminate withholding taxes on dividends, interest, and royalties.

It is important to note that each tax incentive in Luxembourg has specific conditions and requirements that must be met to qualify. Professional advice from tax advisors and legal experts is recommended to ensure compliance with applicable regulations and to optimize tax planning strategies based on individual circumstances. For more information please reach us at: info@dayslegal.com