Luxembourg corporate income tax rate: 14%, 16%, 23.87%

What is the Luxembourg corporate income tax rate in 2026?

The Luxembourg corporate income tax rate is 14% where taxable income does not exceed EUR 175,000 and 16% where it exceeds EUR 200,000. Between those two amounts, the tax is EUR 24,500 plus 30% of the income above EUR 175,000. This scale applies from tax year 2025 onwards.

Those rates are not the final burden. Corporate income tax is increased by 7% for the employment fund, then topped up by municipal business tax, whose rate depends on the municipality of the registered office. For a company established in Luxembourg City, the aggregate tax burden comes to 23.87%.

The previous scale, applicable from tax years 2019 to 2024, was 15% and 17%. The one-point cut comes from the law of 20 December 2024, which amended article 174, paragraph 1 of the amended law of 4 December 1967 on income tax. The Ministry of Finance's 2026 novelties announce no further change to the scale: the 2025 scale is the one in force for the current tax year.

The employment fund contribution adds 7% on top of the tax

The employment fund contribution increases Luxembourg corporate income tax by 7%. It is not added to the rate but applied to the tax itself: a headline rate of 16% becomes an effective 17.12%, and a rate of 14% becomes 14.98%.

The misreading is common and expensive in forecasting. Adding seven points to the headline rate would give 23%, a third too much. The rule is multiplicative, not additive: 16% × 7% = 1.12 percentage points of extra burden, which the tax administration shows as a separate line in its aggregate burden calculation.

The surcharge is long-standing and stable: it has been set at 7% for collective entities since tax year 2013. It follows the scale mechanically, so the 2025 one-point cut also reduced the contribution, from 1.19 to 1.12 points for companies on the upper rate.

Municipal business tax takes the aggregate burden to 23.87%

The aggregate tax burden of a capital company established in Luxembourg City is 23.87% for tax year 2025: 16% corporate income tax, 1.12% employment fund contribution and 6.75% municipal business tax. That figure, not the 16% headline rate, is the one to model with.

Municipal business tax is computed on its own base. Trading profit is first reduced by an allowance of EUR 17,500 for taxpayers liable to corporate income tax, then multiplied by an assessment rate of 3%. The resulting assessment base is multiplied by the municipal rate, set by each municipality according to its financial needs and generally between 200% and 400%. In Luxembourg City, the combination produces 6.75% of trading profit.

The municipal rate therefore makes the aggregate burden vary from one municipality to another at identical profit. The multipliers applicable to tax year 2026 were published in Mémorial A553 of 11 December 2025; we were unable to read the municipality-by-municipality list at the verification date and therefore only reproduce the Luxembourg City rate, as published by the tax administration.

For a company on the lower rate, the same breakdown gives 21.73%: 14% corporate income tax, 0.98% employment fund contribution and 6.75% municipal business tax. The Ministry of Finance uses that figure in its 2025 novelties, against 22.80% in 2024.

Between EUR 175,000 and 200,000 the marginal rate reaches 30%

Between EUR 175,000 and EUR 200,000 of taxable income, every additional euro bears 30% corporate income tax in Luxembourg, close to double the upper headline rate. This smoothing band ensures continuity between the two rates: it prevents one extra euro of profit from tipping the whole base from 14% to 16%.

The mechanism is arithmetically simple. At EUR 175,000 of taxable income the tax is EUR 24,500, exactly 14%. At EUR 200,000 the intermediate formula gives 24,500 + 30% × 25,000 = EUR 32,000, exactly 16%. The two formulas meet at the boundaries, and the step is absorbed by the high marginal rate of the intermediate zone.

The practical consequence concerns year-end decisions. Within that band, a late deductible expense produces a 30% tax saving before municipal business tax, against 16% above EUR 200,000. Conversely, an exceptional item booked inside the zone costs 30% instead of 16%. It is the only stretch of the scale where the cut-off judgement materially changes the bill.

The rate applies to taxable income, not to accounting profit

The Luxembourg corporate income tax rate applies to taxable income as determined for tax purposes, which almost never matches the result shown in the annual accounts. Three adjustments explain most of the gap: non-deductible taxes, exempt income and carried-forward losses.

Income taxes and net wealth tax are not deductible expenses. Article 168 of the income tax law lists corporate income tax, municipal business tax and net wealth tax among non-deductible expenditure: they are added back to the accounting result before the scale is applied. A company reasoning on its after-tax result therefore systematically understates its base.

In the other direction, income covered by the parent-subsidiary regime leaves the base. A holding company whose dividends and capital gains meet the exemption conditions can show a high accounting profit and taxable income close to zero: the rate then applies only to the residue. We set out that mechanism on our page on SOPARFI taxation.

Losses from earlier years are then deducted. Only losses of the seventeen preceding tax years may be carried forward, the oldest being offset first; there is no carry-back in Luxembourg, and only the company that suffered the loss may deduct it. Regular accounting records for the year in which the loss arose are a condition of the carry-forward.

Then there is the floor. Even with nil taxable income, a Luxembourg capital company remains liable for the minimum net wealth tax, set by reference to its balance sheet total. A loss-making year does not produce a nil tax bill, which first-year forecasts regularly overlook.

When the tax falls due: quarterly advances and the return

Luxembourg corporate income tax is paid by quarterly advances due on 10 March, 10 June, 10 September and 10 December of the tax year. Advances for municipal business tax and net wealth tax follow a staggered calendar, on 10 February, 10 May, 10 August and 10 November.

Each advance is set in principle at one quarter of the tax resulting from the last established assessment, after offsetting withholdings. It is amended on the taxpayer's reasoned request, or on the administration's own motion where it holds evidence justifying a decrease or an increase.

The return itself must be filed by 31 December of the year following the tax year. Since tax year 2017, capital companies covered by article 159, paragraph 1, A.-1 of the income tax law must file form 500 electronically through MyGuichet, using a LuxTrust product. The full route is described on our page on the corporate tax return.

The gap between advances and the final assessment is the cash-flow error we meet most often. Advances follow the last established assessment, which may relate to a year two or three years old: a company whose activity has doubled keeps paying advances calibrated on its former level, then receives a catch-up assessment covering several years. Requesting a revision of the advances takes an hour to prepare and is billed at the hourly rate published in our pricing grid. The catch-up it avoids is of an entirely different order.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). The rates, thresholds, dates and legal references in this article were verified on 7 September 2026 against the official sources listed below.

Sources consulted: the tax administration page on the scale applicable to collective entities, for the scale in force from tax year 2025 and the intermediate band formula; the page on the aggregate tax burden of collective entities, for the 16% + 1.12% + 6.75% breakdown in Luxembourg City; the page on computing municipal business tax, for the EUR 17,500 allowance, the 3% assessment rate and the range of municipal rates; the page on the employment fund, for the 7% surcharge applicable since 2013; the page on loss carry-forward, for the seventeen-year period and the order of offset; the pages on tax advances and the tax calendar, for the quarterly deadlines; the frequently asked questions on form 500, for the 31 December deadline and mandatory electronic filing. The law of 20 December 2024, published in Mémorial A574 on Legilux, for the one-point cut in article 174, paragraph 1. The Ministry of Finance's 2025 and 2026 novelties, for the aggregate rates of 21.73% and 23.87% and the absence of any further change to the scale in 2026.

One point could not be verified at that date: the municipality-by-municipality list of multipliers for tax year 2026. The publishing act exists, Mémorial A553 of 11 December 2025, but its content could not be read directly. A reader who needs their own municipality's rate should check that Mémorial on legilux.public.lu, or the table of multipliers published by the tax administration. Only the Luxembourg City rate of 6.75% is reproduced here, on the authority of the aggregate tax burden page.

This article sets out the law as it stands at the publication date. Rates, thresholds and calendars change, and any decision binding your structure should be verified as at the date you rely on it. Report an error to contact@financialservices.lu: the correction is dated in the article.