Luxembourg taxes its corporate residents on their worldwide income and non-residents only on Luxembourg-source income.
Businesses with taxable income lower than EUR 175,000 are subject to CIT at a rate of 15%. Businesses with taxable income between EUR 175,000 and EUR 200,001 are subject to CIT computed as follows: EUR 26,250 plus 31% of the tax base above EUR 175,000 (for fiscal year [FY] 2019). The CIT rate is 17% for companies with taxable income in excess of EUR 200,001 leading to an overall tax rate of 24.94% in Luxembourg City for FY 2019 (taking into account the solidarity surtax of 7% on the CIT rate, and including the 6.75% municipal business tax rate applicable). Please also refer to the Significant developments section regarding the expected reduction of the income tax rate.
The CIT does not apply to tax-transparent entities (e.g. general or limited partnerships or European Economic Interest Groupings).
Although there used to be a minimum CIT for Luxembourg resident companies, no such minimum CIT is applicable as of 2016. It has been replaced by a minimum net wealth tax (see Net wealth tax [NWT] in the Other taxes section).
A 7% solidarity surtax is imposed on the CIT amount.
Taking into account the solidarity surtax, the aggregate CIT rate is 19.26% for companies with taxable income in excess of EUR 30,000.
Municipal business tax on income
Municipal business tax is levied by the communes and varies from municipality to municipality. The municipal business tax for Luxembourg City is 6.75%.
The effective combined CIT rate (i.e. CIT, solidarity surtax, and municipal business tax) for Luxembourg City is 24.94% for FY 2019.