In our earlier overview of Luxembourg’s corporate tax system, we outlined the rates applicable through 2024. With effect from tax year 2025, Luxembourg has reduced its corporate income tax (CIT) rates by one percentage point, further strengthening the country’s position as a leading European business and financial hub.
The fundamentals remain unchanged: corporate residents are taxed on their worldwide income, while non-resident companies are taxed only on income from Luxembourg sources.
The updated CIT rates are as follows: businesses with taxable income up to € 175,000 are now subject to a CIT rate of 14% (previously 15%). For taxable income between € 175,000 and € 200,001, the tax is calculated as a base amount of EUR 24,500 (previously EUR 26,250) plus 30% (previously 31%) of the portion exceeding € 175,000, but lower than € 200,001. Companies with taxable income above € 200,001 are subject to a CIT rate of 16% (previously 17%).
Taking into account the 7% solidarity surtax on CIT and the 6.75% municipal business tax applicable in Luxembourg City, the overall effective tax rate for companies established in the capital falls from 24.94% to 23.87%. This reduction brings Luxembourg closer to the OECD and EU averages, reflects Luxembourg’s continued commitment to competitiveness and reinforces its appeal as a jurisdiction of choice for international businesses establishing a presence in Europe.
If you are considering setting up a company in Luxembourg or reviewing your existing structure, contact us (office@bensonformations.com, +44 20 3974 1244) to discuss how the Luxembourg company structure may benefit you.
