Starting a business in
🇱🇺Luxembourg
Checked November 4, 2026 · How we score
Corporate tax
23.87%
Top income tax
45.78%
Setup from
$3,500
all-in, first year
Time to form
4 weeks
visit usually needed
Taxes in Luxembourg
| Corporate income tax | 23.87% 2025-2026 combined rate in Luxembourg City: 16% CIT plus 7% employment-fund surcharge plus 6.75% municipal business tax. Lower CIT bands apply to taxable income up to EUR 200,000. A further 1-point CIT cut from 2027 has been proposed in Budget 2027 but is not yet law. |
|---|---|
| Personal income tax (top) | 45.78% 42% top income tax rate plus a 9% employment-fund surcharge on higher incomes gives about 45.78% for the highest bracket; tax classes 1, 1a and 2 apply. |
| Tax system | Worldwide income |
| Capital gains tax | 0%Private gains on shares are generally exempt if held for more than six months and the stake is 10% or less; speculative and substantial-holding gains are taxed at ordinary rates (substantial holdings at half rate). |
| Dividend withholding (non-residents) | 15% |
| VAT / GST | 17% |
| Social security | Employer and employee social contributions together are roughly 25-30% of gross pay with caps; self-employed pay about 24-25% on income up to the ceiling. |
Forming a company in Luxembourg
| Usual entity | S.a r.l. (private limited company) |
|---|---|
| Minimum capital | $13k |
| Setup cost (all-in) | $3,500–$9,000 |
| Annual running cost | $8,000–$25k |
| Time to incorporate | 4 weeks |
| Form remotely as a foreigner | No |
| Local director required | Yes |
| Local address required | Yes |
| Owners on public register | Yes |
| Statutory audit for small companies | No |
| Business banking for non-residents | Hard |
Residency and visas
EU citizens have free movement. Non-EU founders usually need a self-employed or investor authorisation, or an EU Blue Card if employed; processing takes months and a viable business plan is required.
| Digital nomad visa | No |
|---|---|
| Golden visa | No |
| Ease of residency for founders | 4/5 (1 = easiest) |
Special tax regimes
Small-profit reduced CIT bands
Companies with taxable income up to EUR 175,000 pay a reduced CIT rate (14% in 2026), with a transitional band up to EUR 200,000, lowering the combined rate versus the 23.87% headline.
IP regime (80% exemption)
Qualifying net income from eligible IP can be 80% exempt from CIT and 100% exempt from net wealth tax under the OECD-compliant nexus approach.
Participation exemption
Dividends and gains from qualifying subsidiaries (10% stake or EUR 1.2m cost, held 12 months) are generally exempt, which makes Luxembourg a common EU holding location.
Pros and cons
Why founders pick Luxembourg
- EU single-market access and well-developed treaty network
- Participation exemption and IP regime for holdings
- Triple-A economy with strong banking and fund ecosystem
- English widely used in business
Watch out for
- Combined corporate tax of about 24% is not low
- High setup, domiciliation and accounting costs
- Substance and local manager expected for tax residency
- Net wealth tax (minimum charge) applies to companies
Best for: Holding and fund structures · Funded fintech and SaaS companies serving EU clients · Founders who need an EU-regulated base with strong credibility
Luxembourg: common questions
What is the corporate tax rate in Luxembourg?
In 2025 and 2026 the combined rate for a company in Luxembourg City is 23.87%: 16% CIT, a 7% surcharge on the CIT, and 6.75% municipal business tax. Other municipalities range slightly lower or higher, and profits up to EUR 200,000 benefit from reduced CIT bands.
How much capital do I need to start a company in Luxembourg?
An S.a r.l. requires EUR 12,000 minimum share capital, fully paid in, and an S.A. requires EUR 30,000. The deed must be signed before a Luxembourg notary, and the company must have a registered office in the country.
Can a non-resident open a Luxembourg company remotely?
Formation needs a notary, though a power of attorney can be used. The company must also be managed from Luxembourg for tax residence, which usually means a resident manager or a domiciliation and management provider, so a fully remote setup is not practical.
Is Luxembourg a tax haven?
It is frequently labelled one because of historic holding and fund regimes, but it is an EU member, applies EU anti-avoidance rules and the 15% global minimum tax, and is not on the EU blacklist. Ordinary operating companies pay close to 24%.
Does Luxembourg tax dividends?
Dividends paid to non-residents are subject to 15% withholding tax unless the participation exemption or a tax treaty reduces or removes it. Qualifying EU parent companies holding at least 10% for 12 months usually receive dividends free of withholding.
Sources
- Luxembourg Direct Tax Administration (ACD)
- Guichet.lu - Setting up a business
- PwC Worldwide Tax Summaries - Luxembourg
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Not tax or legal advice. Rates and rules change; we check official sources and update every page, but verify with a licensed adviser in the country before acting. Spotted something out of date? Use the correction form below.