Investment tax credit Luxembourg: 12% or 18% rates

What is the investment tax credit in Luxembourg?

The investment tax credit in Luxembourg is a direct reduction of income tax, granted on request to commercial, industrial, mining or craft enterprises established in the country. Since tax year 2024 the rate is 12% of eligible investments, rising to 18% for a certified digital transformation or ecological and energy transition project.

The distinction between a credit and a deduction is worth real money. The amount obtained comes off the tax bill itself, not off taxable profit. A depreciation charge reduces the base, and is therefore worth, in cash terms, only the tax rate applied to that base; a 12% credit is worth 12% of the investment, euro for euro. That difference in nature is what justifies the formalities around it.

The scheme lives in article 152bis of the amended law of 4 December 1967 on income tax. It was reformed by the budget law of 22 December 2023, with effect from tax year 2024: the global credit rate rose from 8% to 12%, the credit for complementary investment was repealed, and a dedicated strand for digital transformation and ecological and energy transition was introduced.

Two scoping conditions govern everything else. The enterprise must fall under article 14 LIR, meaning it carries on a commercial, industrial, mining or craft activity: a holding company without such an activity is outside the scheme. And the investment must be made in an establishment located in Luxembourg and intended to remain there permanently, which rules out an asset acquired for a foreign permanent establishment.

What is the rate of the global investment tax credit?

The rate of the global investment tax credit in Luxembourg is 12% since tax year 2024, against 8% on the first EUR 150,000 tranche and 2% above it under the previous regime. The single rate applies to the acquisition value or cost price of the investments made during the financial year.

The tax base is set out in a list, and that list cannot be guessed. It covers investments in tangible depreciable assets other than buildings, agricultural livestock and mineral and fossil deposits; sanitary and central heating installations incorporated into hotel buildings; buildings of a social character; fixed assets approved for special depreciation; and software acquired from an unrelated enterprise.

Software follows a rule of its own, often discovered too late. The credit relating to software acquisitions cannot exceed 10% of the tax due for the tax year in which the financial year of acquisition closes. A large software investment in a low-profit year therefore does not produce the expected effect, and the timing of a software project deserves to be settled before signature, not after.

Which investments are excluded from the global credit?

Excluded from the global investment tax credit in Luxembourg are assets normally depreciated over less than three years, assets acquired through the bulk transfer of an enterprise, of an autonomous part of an enterprise or of a fraction of an enterprise, second-hand assets, certain motor vehicles, and software acquisitions covered by a ministerial certificate.

Two exceptions are worth knowing, because they reverse the principle. Second-hand assets become eligible again, up to EUR 250,000, when they are invested as part of a first establishment: taking over a fleet of used machines to start an activity is therefore not automatically out of scope.

The second exception concerns vehicles. Zero-emission motor vehicles, powered exclusively by electricity or by a hydrogen fuel cell, of category M1, first registered after 31 December 2017, qualify for the credit up to EUR 50,000 of the acquisition price per vehicle. A combustion-engine vehicle remains excluded, whatever its business use.

We regularly see, when taking over a file, a credit claimed on a company car fleet without distinguishing powertrains, or on furniture renewed every year. Rebuilding the genuinely eligible base after the fact, from the depreciation schedule and the invoices, rarely takes less than a day, and it usually ends with a credit lower than the one shown in the projection given to the shareholder.

How does the 18% credit for digital transformation work?

The investment tax credit for a digital transformation project in Luxembourg is 18% of the investments and operating expenses incurred within the project. Investments in tangible depreciable assets are the exception: they carry their own 6% rate, which is added to the 12% global credit and therefore also lands at 18%.

The base is markedly wider than that of the global credit, and that is the whole point of the strand. It covers tangible depreciable assets other than buildings, agricultural livestock and mineral and fossil deposits; investments in software or patents other than those acquired from a related enterprise; expenses for the use or concession of use of patents or software; staff costs directly assigned to the digital transformation; and training expenses for that staff. A software subscription and a salary fall within the base, which the global credit does not allow.

The project must still match the definition used. Digital transformation must redefine the enterprise's overall production or service delivery process so as to improve productivity substantially, or implement an innovative business model creating new value for stakeholders. The governing word is redefine: the tool is not the project.

The list of exclusions confirms this in reverse. Out of scope are the use of organisational methods already used in the enterprise, changes in business practices, mergers and acquisitions, the cessation of use of a process, the simple replacement or extension of equipment, changes resulting from price variations alone, customised production and adaptation to local markets. Replacing an end-of-life server is not a digital transformation.

Which ecological and energy transition projects qualify?

An ecological and energy transition project qualifying for the investment tax credit in Luxembourg is defined as any change reducing environmental impact, in the production or consumption of energy or in the use of resources, that change having to be significant and of a technical or material nature.

The recognised forms overlap with those of the digital strand. A project may redefine a production process so as to improve its energy efficiency substantially, implement an innovative business model falling notably within the circular economy, or significantly redefine processes in order to increase the identification and mitigation of digital risks. The two strands then share the same rate, the same widened base and the same certification procedure.

What steps and deadlines apply to the certificate?

Obtaining the investment tax credit for a digital transformation or ecological and energy transition project in Luxembourg requires two distinct steps with the Ministry of the Economy: an eligibility attestation covering the project itself, then a certificate attesting to the reality of the investments and operating expenses incurred during the financial year.

The eligibility attestation request is addressed to the Ministry of the Economy and is made exclusively online, through MyGuichet.lu or the MyGuichet.lu mobile application. The ministerial decision is taken as soon as possible and at the latest within three months of receipt of a complete request. The word complete carries the whole weight: an incomplete file does not start the clock.

The certificate request follows a far tighter timetable. It must be filed at the latest within the two months following the close of the financial year during which the investments or operating expenses were made. After verification, the minister issues the certificate at the latest within nine months of the close of that same financial year. The procedure has been available on MyGuichet.lu since 1 January 2025.

Two months after the close is, in most files, before the accounts are finalised and well before the tax return is filed. The certificate itself is attached to the return, and it applies for the first time to financial year 2024. The timetable of the Luxembourg form 500 return therefore protects nothing here, and we put this two-month deadline into the closing calendar as soon as a file carrying a certified project is opened.

What happens to an unused credit when tax is insufficient?

Where the tax is insufficient, the unused investment tax credit in Luxembourg is carried forward and deducted from the tax of the ten subsequent tax years. The fraction relating to software acquisitions is the exception: it does not enter that ten-year carry-forward, and is lost if the tax of the year is insufficient.

The practical consequence is that a loss-making enterprise does not have to give up on the scheme. It does have every reason to track its stock of carried-forward credits by year of origin, exactly as it tracks its stock of losses: the two carry-forwards do not merge, do not run for the same period and do not apply at the same level. The tax loss carry-forward, capped at seventeen financial years, works on the taxable base, while the credit works on the tax bill.

The return makes that distinction visible. The credit is reported on annex 800 to form 500, on line 91 for the investment tax credit and on line 92 for the credit relating to software acquisitions, those amounts then appearing among the amounts to be set off against the tax assessed. The rate schedule on which that assessment is built is detailed in our article on the Luxembourg corporate income tax rate.

One reconciliation remains, and we build it into the annual tax file: the depreciation schedule in the annual accounts against the declared base of the credit. An asset removed from the balance sheet, an asset financed under an operating lease and an asset assigned to a foreign establishment carry no credit, and the gap is corrected at no cost at closing, not at audit.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). Sources were verified on 29 September 2026, the date on which every rate, threshold, deadline and legal reference cited here was cross-checked against an official public source.

The sources consulted are as follows. The Luxembourg direct tax authority, for its A to Z page on the investment tax credit (granted on request, commercial, industrial, mining or craft enterprises within the meaning of article 14 LIR, establishment located in Luxembourg and intended to remain there permanently, tax base, exclusions, ten-year carry-forward), and for annex 800 to form 500, whose line 91 carries the investment tax credit and line 92 the credit for software acquisition. The guichet.public.lu portal, for its page on the modernisation of the investment tax credit (modernisation from 1 January 2024, global rate raised from 8% to 12%, repeal of the credit for complementary investment, total credit of 18% on the tangible depreciable assets of a project), for its pages on the global investment tax credit, on the credit for a digital transformation project and on the credit for an ecological and energy transition project (18% and 6% rates, base widened to software, patents, staff costs and training expenses, definitions and exclusions of both notions, second-hand assets eligible up to EUR 250,000 on a first establishment, zero-emission category M1 vehicles first registered after 31 December 2017 up to EUR 50,000, 10% of tax due cap for software), and for its page on the certificate for the tax credit (eligibility attestation issued by the Ministry of the Economy, request exclusively online through MyGuichet.lu, decision at the latest within three months of a complete request, certificate request within two months of the close, issue at the latest within nine months, procedure opened on MyGuichet.lu on 1 January 2025, first applicable to financial year 2024). The law of 22 December 2023 on the budget, published in the Official Journal of the Grand Duchy of Luxembourg, for the reform of article 152bis LIR from tax year 2024, together with the Ministry of Finance press release of 19 December 2023 and the reform presentation published by the government on 12 July 2023.

Three points could not be verified against the primary text and are therefore not asserted here. The consolidated text of article 152bis LIR: legilux.public.lu and impotsdirects.public.lu are blocked by the network proxy of our editorial environment, and the sources were read through indexed extracts using a search restricted to official domains. The rate applying to software acquisitions alone since tax year 2024: an indexed extract still mentions 8% on the first EUR 150,000 tranche and 2% above it, wording that predates the reform and that we therefore do not repeat; only the 10% of tax due cap, confirmed on several pages, is cited. Finally, whether the credit may be set off against municipal business tax, the sources consulted referring only to income tax. These three points are confirmed with the competent tax office and the Ministry of the Economy, the only bodies that establish enforceable rights.

This article sets out the state of the law at the date of publication and is not personalised advice: whether an investment qualifies depends on the nature of the activity carried on, on where the asset is operated, on its depreciation period, on whether it is new or second-hand and, for certified projects, on the decision of the minister responsible for the Economy. Report an error to contact@financialservices.lu: the correction is dated in the article.