The global investment tax credit is 12% on qualifying investments, while the rate for certified digital or ecological transformation projects reaches 18%. The new rates apply from tax year 2024 — up from 8% — and the separate 13% complementary credit was abolished with effect from tax year 2024.
The reform that reshaped the rates for tax year 2024
Until recently, companies navigated a split system that required tracking multiple layers of deductions, with a baseline rate of 8% alongside a separate complementary credit set at 13%. The complementary version was abolished with effect from tax year 2024. In its place, the core global rate rose to 12%. The shift simplifies the calculation by removing the need to track two parallel mechanisms for a single purchase, replacing the previous fragmented approach with a single, higher baseline rate.
The investment tranche condition did not survive the reform
Founders returning to Luxembourg tax planning often look for the tier system that previously split investments at a specific monetary threshold, creating a step-effect in the tax calculation depending on how much the company spent. Under the new rules, the 150,000 euro investment-tranche condition was removed at the same time as the rate rose to 12%. The calculation is now a flat application against the total qualifying spend, meaning a company applies the 12% rate from the first qualifying euro.
The mechanism filters assets into distinct rate classes
A Luxembourg company deducts this credit directly from its corporate income tax bill. The mechanism relies on matching the asset class to the correct rate, applying the limit, and carrying forward what remains.
| Asset or project class | Rate | Cap or exclusion | Carry-forward |
|---|---|---|---|
| Global investment | 12% | Used assets capped at €250,000 | 10 years |
| Special depreciation | 14% | - | 10 years |
| Digital or ecological transformation | 18% | - | 10 years |
| Digital or ecological physical assets | 6% | - | 10 years |
| Software | 12% | Capped at 10% of tax due | Excluded |
| Stacking rule | The rule adds 6% under the digital or ecological-transition credit for tangible depreciable assets, which may be combined with the 12% global credit for a total of 18% | - | 10 years |
| Excluded list | - | The rule dictates that assets normally depreciated over a period of less than 3 years are excluded | - |
The limits that throttle a claim on standard assets
The table shows the raw rates, but the Administration des contributions directes filters claims through strict boundaries. The rules separate long-term investments from short-term operational spending, catching out founders who assume every business purchase qualifies for a deduction.
Short-lived assets generate no credit
The tax office applies an explicit exclusion list. Because the law dictates that assets normally depreciated over a period of less than 3 years are excluded, the primary filter removes minor, everyday purchases from the schedule entirely. If an item depreciates quickly, it generates no benefit. A company must check its depreciation schedule before assuming an asset will reduce its tax bill.
Used assets hit a hard ceiling
When a company buys second-hand equipment for its first establishment, the law caps the recognized value by strictly limiting the eligible amount for these used assets to €250,000. Anything spent beyond that threshold on used equipment does not enter the calculation. The Administration des contributions directes enforces this as a hard ceiling for the entire first establishment phase. Once the total spending on second-hand equipment hits that boundary, subsequent used purchases yield no further tax credit.
How the software deduction caps out
Software carries its own boundary. While the rate matches the standard 12%, the deduction cannot exceed 10% of the tax due. Under the specific rules for this category, the share of the global credit corresponding to software acquisitions is excluded from the 10-year carry-forward. The company must use the software credit in the year it arises. Unlike physical equipment, software does not build a reserve of tax credits for the future.
Where the carry-forward period protects unused deductions
If a company invests heavily in its early years, the resulting credit often exceeds its corporate income tax liability for that specific period. To address this, the law provides a 10-year carry-forward window, allowing a business to apply the unused portion of the credit against future tax bills provided the asset is not software. The decade-long window gives a capital-intensive startup the ability to offset its future profits using the investments it made before it became profitable. Once the 10-year period expires, the remaining credit drops out.
The digital and ecological rates demand administrative proof
Claiming the higher brackets requires formal validation from the government. To secure the uplifted rate, a certificate from the Minister of the Economy confirming the investments and operating expenses must be filed with the income tax return. Filing the tax return without the document attached leaves the claim unsupported.
The stacking rule for physical assets
Physical assets tied to a transition project follow a specific calculation where the administration applies 6% under the digital or ecological-transition credit for tangible depreciable assets, which may be combined with the 12% global credit for a total of 18%. This counter-intuitive addition forms its own row in the tax planning sequence, aligning the physical components of a certified digital or ecological project with the overall project rate.
Where the special depreciation rate fits in
Certain assets qualify for a different treatment entirely. The law provides a separate bracket for investments benefiting from special depreciation, setting the rate at 14%. This distinct category operates alongside the global and digital transformation rates, requiring its own tracking within the company's accounting records. A founder must ensure the asset is formally classified under the special depreciation rules before applying the rate.
Who remains outside the scope, and what is still unknown
Every tax incentive has a boundary. This one leaves specific liabilities untouched.
Beyond the tax limits, the administration publishes the exact rates and rules, but it leaves the processing timeline unknown. The government does not state how many weeks or months the Ministry of the Economy takes to assess a project and issue the required certificate, meaning a company files its return without knowing exactly when the validation will arrive.
The exact returns that carry the claim
Filing requires a single return (modèle 500) covering corporate income tax, municipal business tax and net wealth tax. The credit lowers the corporate income tax bill, which forms part of a combined rate reaching 23.87% for a company based in the capital. Luxembourg corporate tax also includes a separate municipal business tax portion set at 6.75% through a 225% multiplier, and the single return forces the company to reconcile its investment credits against its overall corporate income tax liability in one place.
The manager carries the compliance risk
Preparing the corporate tax return requires mapping qualifying investments to the correct rate so that the non-qualifying software portions are safely excluded from the carry-forward schedules, aligning the submission with the strict categories the administration enforces.
The stakes extend beyond the immediate tax bill, because the manager's standing matters across the entire lifecycle of the business. When applying for modifications or new authorizations, the manager must not have evaded business and tax obligations, including withholding tax, in previous or current business activities. Missing the standard blocks future moves — tying the founder's personal administrative record to the company's tax discipline.
Figures verified against impotsdirects.public.lu, guichet.public.lu, guichet.public.lu, guichet.public.lu, guichet.public.lu, impotsdirects.public.lu, impotsdirects.public.lu on 2026-09-04.