Luxembourg

New Luxembourg investment tax credits regime to accelerate sustainability transformation  

The law of 22 December 2023 revamped the investment tax credits available under article 152bis of the Luxembourg Income Tax Law. This aims at supporting Luxembourg companies in their digital and ecological/energetic transformation. The most significant change to the rules, in addition to the increase of applicable rates, consists of an inclusion of certain operating expenses connected with the digital/ecological transformation on which an 18% tax credit may apply. This change is expected to provide a strong incentive for companies to accelerate their digital and ecological/energetic transition.

Implementation of Pillar Two minimum taxation rules in Luxembourg

Pillar Two legislation was enacted in Luxembourg on 22 December 2023.

The Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-up Tax (QDMTT) are effective for fiscal years starting on or after 31 December 2023, whereas the Undertaxed Profits Rule (UTPR) would become effective for fiscal years starting on or after 31 December 2024.

The text of the law strictly adheres to the text of the European Union (EU) Pillar Two Directive, with some additions introduced to reflect parts of the Organisation for Economic Co-operation and Development (OECD) Administrative Guidance released in February 2023 and July 2023.

Further amendments may be expected in the future to reflect parts of the OECD Administrative Guidance that has so far not been included in the law and the additional OECD Administrative Guidance that was released on 19 December 2023.

In June 2024, a draft law amending the Pillar Two Law was introduced with the aim to reflect additional parts of the OECD Administrative Guidance of February 2023 and July 2023 that have so far not been included in the law, as well as the OECD Administrative Guidance released on 19 December 2023.