Luxembourg

New tax measures to boost Luxembourg’s financial sector and start-up ecosystem

Encouraging investment in start-ups is the aim of Bill 8526, which was voted on 17 December 2025 by the Luxembourg Parliament. 

The bill sets out the conditions under which investors may benefit from this tax measure:

• The start-up must be less than five years old, have its registered office in Luxembourg, and constitute a ’permanent establishment‘(PE), meaning it must employ at least two full-time equivalent staff, but fewer than 50. Its annual turnover must not exceed 10 million euros (EUR). To ensure a degree of innovation, at least 15% of its expenditure must be dedicated to research and development (R&D). Law firms and companies operating in the real estate sector are expressly excluded from this scheme.
• The investor must hold the capital for a minimum of three years and must not have any direct employment relationship with the start-up, nor be its founder. The investment must exceed EUR 10,000 but may not represent more than 30% of the start-up’s capital.
• The tax credit is set at 20% of the capital invested, capped at EUR 100,000 per year.

This new start-up tax credit would apply as of the 2026 tax year.

In addition, the Luxembourg government is currently considering introducing a dedicated stock-option income tax regime for employees in start-ups and as well as a reform of the income tax regime of carried interest.

New measures impacting Luxembourg pension system

The Luxembourg government (Bill 8634) is introducing an increased pension contribution rates from 24% to 25.5 % in 2026, with increased pension contributions from the State, employers and employees from 8% to 8.5%.

The Luxembourg government also extended the contribution period for early retirement by 8 months by 2030 and progressively each year.

To encourage employees to retire closer to the legal retirement age, the Luxembourg government will grant as from 2026 a tax allowance up to EUR 750 per month (EUR 9,000 per year) for employees that would meet the criteria for early retirement but decide to keep working.

Real estate

Considering the continuous tension in relation to Luxembourg real estate, notably due to the high long-term interest rates that affect the borrowing capacity of households, the Law dated 22 May 2024 introduced new temporary measures in order to boost the housing market. These temporary measures were initially taken only for the tax year 2024. However, the following measures have been extended:

• The increase in the amount of the Bëllegen Akt tax credit to EUR 40,000 (compared to EUR 30,000 initially) per person (EUR 80,000 per couple instead of EUR 60,000) is applicable for a primary residence in Luxembourg purchased between 1 January 2025 and 30 June 2025.
• The temporary Bëllegen Akt Investisseurs rental tax credit of EUR 20,000 per individual (EUR 40,000 per couple) on registration and transcription duties granted to all buyer-investors is applicable for preliminary sales agreements signed between 1 January 2025 and 30 June 2025, if the notarial instrument formalising the transaction was signed between 1 July 2025 and 30 September 2025 (sale-before-completion only)
• The 50% reduction in the tax base used for the computation of registration and transcription duties is applicable in the event of the purchase of a property intended to be rented out, as evidenced by a notarial instrument signed between 1 July 2025 and 30 September 2025, provided the preliminary sales agreement or contract was registered with the Registration Duties, Estates and VAT Authority between 1 October 2024 and 30 June 2025.
• The special construction allowance of 4% (capped at EUR 250,000) applicable to sale-before-completion deeds signed between 1 January and 31 December 2024 is also granted to sale-before-completion purchases for which the deeds of sale were signed between 1 July 2025 and 30 September 2025 if a preliminary contract was registered with the Registration Duties, Estates and VAT Authority by no later than 30 June 2025.
• Capital gains arising from the sale of a property that is part of the individual’s private assets more than 2 years after it was purchased are subject to taxation at a quarter of the overall rate for sales that took place between 1 January 2024 and 30 June 2025, as well as those arising from a sale that took place between 1 July 2025 and 30 September 2025 if the preliminary sales agreement was registered with the Registration Duties, Estates and VAT Authority by no later than 30 June 2025.
• The deferral of taxation on capital gains arising from the disposal of property, under specific conditions (especially if the capital gains are reinvested in housing with an A+ energy rating) is applicable for sales completed between 1 January 2025 and 30 June 2025

The current tax credit (Bëllegen Akt) providing for an allowance on registration and transcription fees of EUR 40,000 per individual purchaser (EUR 80,000 per couple purchaser) for the acquisition of the main residence has been made permanent beyond 30 June 2025.

Since 1 January 2024, passive interest in connection to the main residence is fully tax deductible within the Luxembourg individual income tax return for the year of the determination of the rental value and for the first year following the year of the determination of the rental value.

Since 1 January 2025, capital gains arising from the sale of a property that is part of an individual’s private assets are subject to taxation at half the overall rate if the property is sold more than 5 years after acquisition

Adjustments to personal income tax (PIT) brackets

For employees, the PIT brackets have been adjusted by an equivalent of two and a half index tranches as of 2025, leading to a reduction of PIT. (see the Taxes on personal income section).