Lowering Corporate Income Tax rates in Luxembourg in 2017 and 2018 confirmed

The law regarding the upcoming tax reform has been published on 27 December 2016. The changes impacting companies will enter into force as from 1st January 2017.

The text adopted regarding corporate taxes has not been subject to any substantial changes when compared to the initial provisions. The main provision among these reforms remains the decrease of the corporate income tax rate to 19% as from 2017 and to 18% as from 2018. The limitation to carry tax losses forward for 17 years is also confirmed.

The effective tax rate is something different than the statutory rate. Due to 'marketing purposes' it seems to be that some EU countries chose to minimise tax provisions and lower the statutory rates. With 15% to 18% Corporate Income Tax Rate the Luxembourg government seems to be making a statement and makes the country very tax competitive. However: the effective tax rate including unemployment fund contribution and local business tax (MBT, City Luxembourg) will end up in an effective tax rate of 27,08% in 2017 and 26,01 in 2018.

The law provides for a progressive decrease of the corporate income tax (“CIT”) rate, currently set at 21%.

Applicable rates as from 01.01.2017

Total taxable income    CIT due
≤ to € 25,000    = Total taxable income * 15%
€ 25,001 – € 30,000    = € 25,000 * 15% + Portion of taxable income exceeding € 25,000 * 39%
> to € 30,000    = Total taxable income * 19%


Applicable rates as from 01.01.2018

Total taxable income     CIT due
≤ to € 25,000    = Total taxable income * 15%
€ 25,001 – € 30,000    = € 25,000 * 15% + Portion of taxable income exceeding € 25,000 * 33%
> to € 30,000    = Total taxable income * 18%