Global minimum tax in Luxembourg: 15% and EUR 750m

What is the global minimum tax in Luxembourg and who is in scope?

The global minimum tax in Luxembourg sets a 15% effective tax rate floor for entities of multinational enterprise groups and large-scale domestic groups whose consolidated revenue exceeds EUR 750,000,000, under the amended law of 22 December 2023 on effective minimum taxation, which transposes Council Directive (EU) 2022/2523 of 15 December 2022.

The threshold is not read in the Luxembourg company's own accounts. It is measured in the consolidated financial statements of the ultimate parent entity, and it is enough for it to be met in at least two of the four fiscal years immediately preceding the tested year: that is the directive rule, restated in the Chamber of Commerce opinion on bill 8292. According to the Council of State opinion in parliamentary file 8591, the law applies to fiscal years beginning on or after 31 December 2023.

The practical consequence is brutally simple. A Luxembourg SARL with two million euros of revenue is out of scope whatever its tax rate. A SOPARFI held by a group with nine hundred million euros of consolidated revenue is fully in scope, even if it employs nobody and distributes nothing. The test is the group's, never the entity's, and that is the most frequent confusion in the files we take over.

The Administration des contributions directes publishes the regime under the heading "Pilier 2 – Imposition minimale effective", on its A to Z page and in a frequently updated set of frequently asked questions. The 2023 law was published in Mémorial A no. 864 of 22 December 2023, then amended by the law of 20 December 2024 to reflect the administrative guidance of the OECD/G20 Inclusive Framework, and again by the law of 19 December 2025. The tax treatment of participations remains the one we describe on our SOPARFI taxation page: Pillar Two is added to it, it does not replace it.

What are the three taxes created by the Pillar Two law?

The Luxembourg Pillar Two law creates three distinct taxes that can bear on the same group: the income inclusion rule, the undertaxed profit rule and the national top-up tax. A single information return covers all three, a clarification brought by the amendments to bill 8396.

The national top-up tax is the one that directly concerns a Luxembourg company: it is due by constituent entities located in Luxembourg, and the Administration des contributions directes assesses, controls and collects it. The law provides for a designated filing constituent entity for that tax, which the ultimate parent entity may appoint and, failing that, which the group's Luxembourg entities appoint among themselves.

One fact reassures groups structuring through Luxembourg. On 16 January 2025 the Ministry of Finance announced that the Luxembourg income inclusion rule and national top-up tax had obtained transitional qualifications at OECD/G20 Inclusive Framework level, as had the safe harbour attached to that national top-up tax. Those qualifications are recognised by other jurisdictions applying Pillar Two and hold until the full legislative qualification process is complete.

We state one limit of this article plainly. The separate entry-into-application dates of the two international rules, including the one-year deferral of the undertaxed profit rule, could not be confirmed on an official Luxembourg source during verification. Only the law's application to fiscal years beginning on or after 31 December 2023 could be. A group with a year-end other than 31 December should have its first reportable fiscal year confirmed.

How does the substance-based exclusion reduce the top-up tax?

The substance-based income exclusion removes from the top-up tax base 5% of eligible payroll costs and 5% of the carrying value of eligible tangible assets located in the jurisdiction. Higher transitional rates, set out in a table in article 28, paragraph 3, apply to the early fiscal years.

Two detailed rules drive the computation. Payroll costs capitalised into the value of tangible assets or attributable to excluded income fall out of the base. And where an employee performs more than half of their activities in the jurisdiction, the whole of their costs is retained; below that, the amount is proportional to the time spent there. A group may also elect not to apply the exclusion, and an amendment to bill 8396 accepted that it waive it for part only of the eligible payroll costs, where the tracking cost outweighs the expected benefit.

This is where the Luxembourg holding model meets its difficulty. A company with no employees and no tangible assets has almost no exclusion to deduct: nearly all of its qualifying income becomes excess profit, hence a top-up tax base if the jurisdiction's effective rate falls below 15%. The issue meets the one we cover on our ATAD substance page, with a difference in nature: ATAD substance protects a characterisation, the Pillar Two exclusion reduces a base.

We regularly see the same methodological mistake on assignments. The computation is asked of the local accounting firm as if it could be read off the trial balance, when it presupposes data that Luxembourg bookkeeping does not isolate on its own: eligible payroll costs by jurisdiction, carrying value of eligible tangible assets, share of working time performed in Luxembourg. Preparing those three aggregates before the close costs a fraction of the time needed to rebuild them against a deadline.

Which safe harbours avoid the full computation?

The transitional country-by-country reporting safe harbour, set out in article 59 of the Luxembourg law, relieves a group from running the full effective tax rate and top-up tax computation in a jurisdiction where the conditions are met. The election is made annually, jurisdiction by jurisdiction, by the filing constituent entity.

The transition rate test uses a rate that rises over time: 15% for fiscal years beginning in 2023 or 2024, 16% for 2025 and 17% for 2026. The routine profits test is met where the jurisdiction's profit before tax, as shown in the qualified country-by-country report, is equal to or lower than the substance-based income exclusion computed under the law. The de minimis test, as the Chamber of Commerce describes the OECD administrative guidance, requires average revenue below ten million euros and profit below one million euros in the jurisdiction.

Two formal points deserve attention. The former article 32 was moved into the new article 59 in order to group the transitional rules together: a working note still citing article 32 points to the right regime under the wrong number. And no adjustment may be made to the figures of the qualified financial statements or of the qualified country-by-country report, except where a provision of article 59 requires one. The regime simplifies the computation; it does not allow the input data to be reworked.

Bill 8795, deposited on 17 July 2026, would extend this regime by one year by replacing the 2026 and 2028 dates in article 59 with 2027 and 2029, and would rename the so-called "simplified" effective rate as the "CBC" effective rate. It would also introduce a safe harbour for juxtaposed solutions, an article 32ter on the ultimate parent entity, and the ability to reduce the top-up tax to zero by election where a tested jurisdiction's simplified effective tax rate reaches at least 15%. Its progress could not be verified at 12 October 2026: nothing in it should be taken as settled.

What filing obligations fall on a Luxembourg entity?

A constituent entity located in Luxembourg must register with the Administration des contributions directes (article 49), notify the identity of the filing entity and its jurisdiction (article 50, paragraph 4), then file the top-up tax information return as an XML file on MyGuichet.lu.

Registration covers constituent entities, joint ventures and entities affiliated with a joint venture located in Luxembourg. It presupposes a Luxembourg tax identification number: an entity without one may apply for it to the withholding tax on interest office before registering. The procedure runs online on MyGuichet.lu with LuxTrust or electronic identity card authentication, and the electronic assistant accepts pre-population from an XML file. The deadline is fifteen months after the last day of the fiscal year in which the group enters the scope, extended to eighteen months for the transition year.

The information return follows the same deadline mechanics: fifteen months after the last day of the reportable fiscal year, eighteen months for a transition year. The user guide published by the Administration des contributions directes places the first deadline at 30 June 2026 under article 56, paragraph 2, and the administration publishes a national XML schema allowing the file to be validated before filing. A Luxembourg constituent entity is relieved of filing where a designated local entity files on its behalf, that appointment having to be reported at registration.

Penalties sit at two levels. A EUR 5,000 fine applies to a failure to register, a failure to update or deregister, an incomplete or inaccurate registration, as well as a late or inaccurate notification under article 50, paragraph 4. A fine of up to EUR 250,000 applies to a failure to file the information return, to a late filing or to an incomplete or inaccurate one. The administration's FAQ adds, under article 25, paragraph 4, that the tax assessments allowing the taxes concerned to be paid are issued within three years after the end of the fiscal year in question, provided the returns were filed on time.

What does Pillar Two change for a Luxembourg holding company?

For a Luxembourg holding company, Pillar Two changes an administrative burden before it changes a tax burden: the constituent entity located in Luxembourg registers, notifies the filing entity and appears in the group's information return, even where no top-up tax is due in Luxembourg.

The reasoning is worth taking in order. The vast majority of the companies we administer stay below the EUR 750,000,000 threshold, and Pillar Two does not concern them in any way. But it only takes one shareholding chain up to a group above that threshold for the Luxembourg entity to become a constituent entity, with its own three obligations. The trigger is not the size of the holding company: it is the identity of its ultimate shareholder.

The mistake we see most often is neither tax nor accounting, it is calendar. The Pillar Two data request arrives from the group's tax department a few weeks before a consolidation deadline, and it bears on aggregates that Luxembourg annual accounts do not present as such. The administration's FAQ illustrates the level of detail expected: it distinguishes deferred taxes recognised in the balance sheet from those appearing in the notes, and accepts that a disclosure in the notes satisfies article 53, paragraph 2. Our consolidation work starts precisely from that articulation.

For a typical file, the Luxembourg work does not form a separate assignment: it sits inside the annual close, as a completed data pack and two online procedures. The order of magnitude therefore remains that of an addition to the close, not that of a structuring study, and that is the trade-off we set out with the client before committing anything. A structural analysis, by contrast, belongs to the support described on our tax advisor page.

What is moving in 2026 and what should be watched?

In 2026 the global minimum tax in Luxembourg moves mainly in how it circulates between administrations: the law of 19 December 2025 organises the automatic exchange of top-up tax information returns, and a Grand Ducal regulation of 26 May 2026 lists the partner jurisdictions.

The law of 19 December 2025, published in Mémorial A no. 595 of 22 December 2025, transposes Directive (EU) 2025/872 of 14 April 2025 and amends the 2023 law. It rests on a standardised form modelled on the OECD and G20 GloBE information return. According to bill 8591 from which it stems, the first transmission of a top-up tax information return takes place no earlier than 1 December 2026: the final published text may differ on that point, which we could not read in the Mémorial.

The Grand Ducal regulation of 26 May 2026, published in Mémorial A no. 251, establishes the list of jurisdictions having concluded an eligible agreement with Luxembourg for that exchange. On the administrative guidance side, the frequently asked questions of the Administration des contributions directes were expanded on 19 December 2025, with a question on the issue of tax assessments and clarifications on deferred taxes, and again according to the newsletter of 5 June 2026, which reports new questions in chapter 10 on the article 49 registration procedure and on the article 50, paragraph 4 notification.

Two bills remain to be followed and must not be treated as law in force. Bill 8396 amends the 2023 law, notably to give a uniform definition of the revenue used for the threshold, to exclude securitisation undertakings from the filing entity function and to deal with the undertaxed profit rule exclusion for groups in the initial phase of international activity. Bill 8795, deposited on 17 July 2026, carries the safe harbours mentioned above. We could not establish their progress at 12 October 2026.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). Sources verified on 12 October 2026: every rate, threshold, deadline, fine, article number and date in this article was checked that day against an official Luxembourg or European source, and no value was taken from memory.

The sources consulted fall into three sets, named here with the page and the date on which each was read. The legal texts first: the consolidated text of the law of 22 December 2023 on effective minimum taxation on Legilux, for the 15% floor, the EUR 750,000,000 threshold and the structure of the law; article 28, paragraph 3 of that same text, for the substance-based income exclusion; its article 59, for the transitional safe harbour and the transition rates of 15, 16 and 17%;

the law of 19 December 2025 in Mémorial A no. 595 of 22 December 2025 and the Grand Ducal regulation of 26 May 2026 in Mémorial A no. 251, for automatic exchange and the list of partner jurisdictions.

The administration next: the 2023 legislation page and the "Pilier 2" A to Z page of the Administration des contributions directes; its "Loi Pilier 2" frequently asked questions in their version of 19 December 2025, for the tax assessments and for deferred taxes; its newsletter of 5 June 2026, for the chapter 10 update; its "Déclaration des informations GloBE" user guide, for the first deadline of 30 June 2026, the XML format and the national schema; the "Pilier 2" page of Guichet.lu, for registration, notification and fines; the government press release of 16 January 2025, for the transitional qualifications.

The parliamentary record last: the Chamber of Commerce opinion on bill 8292, for the two-out-of-four-years rule and for the de minimis test of ten million and one million euros; the Council of State opinion in file 8591 of 2 December 2025, for the first fiscal year of application; the government amendments to bill 8396, for the three taxes, the designated filing constituent entity and the single return; the deposit of bill 8795 of 17 July 2026, for the announced changes.

Four points could not be verified and are flagged as such in the body of the article. The separate entry-into-application dates of the income inclusion rule and of the undertaxed profit rule, where only the general application to fiscal years beginning on or after 31 December 2023 could be confirmed. The complete table of transitional rates of the substance-based exclusion, of which only the standing 5% rate was read. The progress of bills 8396 and 8795 at 12 October 2026.

And any extension of the first filing deadline of 30 June 2026, on which no official source was found. A reader can check those four points independently on the "Pilier 2" A to Z page of the Administration des contributions directes and its frequently asked questions, on the coordinated text published on Legilux, and on files 8396 and 8795 of the Chamber of Deputies website.

This article states the law as it stands at the date of publication and does not constitute personalised tax or legal advice: a specific situation calls for its own review, in particular to determine whether an entity is a constituent entity and what its first reportable fiscal year is. Report an error to contact@financialservices.lu: the correction is dated in the article.