Tax optimisation in Luxembourg: Legal strategies 2026
Mickaël LOC
International tax expert ·
Tax optimisation in Luxembourg: Legal strategies 2026
Luxembourg offers a range of internationally recognised legal tax optimisation tools. From the parent-subsidiary regime to the IP Box, not forgetting the network of 83 double taxation treaties, companies can effectively structure their tax burden while fully respecting OECD BEPS rules and European ATAD directives.
Participation exemption (parent-subsidiary) regime
Dividends received and capital gains realised on the sale of qualifying participations are 100% exempt from IRC and ICC. Conditions: hold at least 10% of the capital (or a participation with an acquisition cost of at least €1.2M) for at least 12 months, and the subsidiary must be subject to a comparable tax (at least 8.5%). This regime makes Luxembourg an ideal platform for intermediate holdings.
Holding structures and SOPARFI
The SOPARFI (Financial Participation Company) combines the participation exemption regime with Luxembourg's vast network of tax treaties. It allows dividends to be received and participations sold nearly tax-free, while accessing reduced withholding tax rates provided by bilateral treaties. The SOPARFI is not a special regime but an ordinary commercial company (SARL or SA) benefiting from Luxembourg tax common law.
Compliant planning and substance
- Meet economic substance requirements: offices, qualified employees, decisions taken in Luxembourg
- Comply with anti-abuse rules (ATAD): principal purpose test, CFC rules, exit taxation
- Document transfer prices in accordance with OECD guidelines (local report, master file, CbCR)
- Check compatibility with Pillar 2 rules (minimum taxation of 15% for groups with turnover above €750M)
Tailor-made tax strategy Our tax experts design compliant and optimised structures for your international group.
