Corporate tax rates in Luxembourg in 2026

The three layers of corporate income tax

The Luxembourg system stacks three distinct levies, which explains why the headline rate (17% IRC) differs significantly from the effective rate:

• IRC (corporate income tax): 15% up to €175,000 of taxable income, then an intermediate bracket between €175,000 and €200,000 (€26,250 + 31% of the excess), then 17% beyond €200,000.
• Employment fund contribution: surcharge of 7% applied on the IRC itself, i.e. an effective extra cost of 1.19% (17% x 7%). Many entrepreneurs forget this line.
• ICC (municipal business tax): base rate of 3% multiplied by the municipal coefficient. In Luxembourg city, the coefficient is 225%, which gives an effective ICC of 6.75%. Other municipalities apply lower coefficients.

Synthetic formula: effective rate = IRC x (1 + 7%) + ICC. In Luxembourg city beyond €200k: 17% x 1.07 + 6.75% = 18.19% + 6.75% = 24.94%.

The reduced SME rate: 15% up to €175,000

Luxembourg offers a favourable regime for small structures. For a company whose taxable income does not exceed €175,000 for the year, the IRC rate drops from 17% to 15%. The overall effective rate then becomes in Luxembourg city: 15% x 1.07 + 6.75% = 16.05% + 6.75% = 22.80%. Between €175,000 and €200,000, a progressive transition formula avoids abrupt threshold effects: tax is calculated as €26,250 + 31% of the fraction above €175,000, until reaching the full rate of 17% at €200,000. In practice, most young SARLs and incorporated freelancers stay in the first bracket for 2 to 4 years, which improves their start-up cash flow.

ICC coefficients: choosing your municipality

The ICC coefficient varies strongly from one municipality to another. A company domiciled outside Luxembourg city can save several tax points. Some reference municipalities (2026 rates):

Warning: domiciliation in a low-ICC municipality must correspond to an effective registered office. The administration can requalify a convenience domiciliation if the real activity is carried out elsewhere (tax residence challenge based on substance).

Wealth tax (ISF)

In addition to IRC and ICC, Luxembourg companies are subject to a minimum wealth tax (IMF) calculated on the total balance sheet as of January 1. The scale is progressive by bracket:

• Up to €350,000 balance sheet: €535
• From €350,000 to €2M: €1,605
• From €2M to €10M: €5,350
• From €10M to €20M: €10,700
• Beyond €20M: up to €32,100 depending on balance sheet size

A rate of 0.5% then applies beyond that on net wealth. The IMF is deducted from income tax if the IRC is higher (tax credit).

Regimes that bring down the effective rate

The headline rate of 24.94% is only a theoretical ceiling. In practice, most Luxembourg structures pay much less thanks to:

• SOPARFI regime and participation exemption: 100% exemption on dividends and capital gains on qualifying participations (> 10% or acquisition cost > €1.2M, holding > 12 months). Well-structured Luxembourg holdings often pay an effective tax close to 0%.
• IP Box: 80% exemption on net income from eligible intellectual property, bringing the effective rate to approximately 5.2% for software publishers and R&D companies.
• Tax treaties: Luxembourg has over 80 double taxation treaties that reduce or eliminate withholding tax on inbound and outbound flows (dividends, interest, royalties).
• Loss carryforward: tax losses can be carried forward for 17 years, smoothing the tax burden for growing companies.

To explore these regimes further, see IP Box Luxembourg : Le régime fiscal à 6,75 % pour les brevets and 83 conventions fiscales : Double imposition Luxembourg.

European comparison 2026

Luxembourg ranks in the middle of the table on nominal rate, but first on flexibility of regimes and legal certainty of rulings.

Impact of OECD Pillar 2 (15% minimum rate)

Since 2024, multinational groups with consolidated turnover above €750M are subject to the global minimum tax (GloBE) of 15% per jurisdiction. For Luxembourg, this means that highly optimised SOPARFI or IP Box structures must calculate a top-up tax if their effective rate per jurisdiction falls below 15%. This framework does not concern Luxembourg SMEs and startups, but deeply modifies the tax planning of European and American groups that use Luxembourg as a hub.

Deadlines and reporting obligations

• Return 500 (IRC + ICC + IF): to be filed before May 31 of year N+1, with the possibility of extension until December 31.
• Quarterly instalments: 4 instalments calculated on year N-1 tax (March 10, June 10, September 10, December 10).
• Tax notice: issued by the ACD after audit, with 3 months to regularise or contest.
• DAC6 declaration: mandatory for certain cross-border arrangements at risk.

Quick simulations for a Luxembourg SME

Three numerical examples in Luxembourg city:

• SARL with €50,000 net profit: IRC 15% x 1.07 = €8,025, ICC 6.75% = €3,375. Total approximately €11,400 (22.80%).
• SARL with €150,000 net profit: IRC 15% x 1.07 = €24,075, ICC €10,125. Total approximately €34,200 (22.80%).
• SA with €500,000 net profit: IRC high bracket €85,000 x 1.07 = €90,950, ICC €33,750. Total approximately €124,700 (24.94%).

Conclusion: read beyond the nominal rate

The 24.94% rate is only a starting point. Appropriate structuring (SOPARFI, IP Box, choice of municipality, optimisation of manager compensation, tax treaties) allows the actual effective rate to be brought down to 5 to 18% depending on the business model. To explore further, see our detailed analysis by type of activity and our SARL vs SA comparison SARL vs SA au Luxembourg : Quelle forme juridique choisir ?.