Luxembourg tax regime 2025: A practical guide for entrepreneurs and investors

You are choosing a vehicle to launch your Luxembourg business, protect your assets, raise capital, and keep taxes predictable. In Luxembourg, fully taxable companies pay corporate income tax (CIT) of 16% for the top bracket plus a 7% employment-fund surcharge (which brings the CIT portion to 17.12%), and you add the municipal business tax (MBT) set by each commune (for example, 6.75% in Luxembourg-City). You get a combined headline around 23.87% for Luxembourg-City.

You also budget for net wealth tax (NWT). From 2025, the minimum NWT is a simple three-band scale based on balance-sheet size (EUR 535 / 1,605 / 4,815). The rules sit in the wealth-tax law as administered by the ACD .

Luxembourg VAT uses a 17% standard rate, with reduced and super-reduced rates for specific supplies. If your annual turnover stays within the small-enterprise threshold, you can opt for the simplified scheme (generally EUR 50,000), which eases compliance for very small operators.

Dividend distributions carry a domestic 15% withholding tax unless an exemption applies. The exemption for qualifying parents is set out in Article 147 of the income-tax law (LIR), and the participation exemption for inbound dividends and share gains is in Article 166 LIR. Luxembourg does not levy domestic WHT on arm’s-length interest or on royalties under ordinary rules.

Specifically, Luxembourg’s famed participation-exemption (the “mère-filiale” regime) fully exempts qualifying dividends and liquidation proceeds at the receiving company level if, at the distribution date, the recipient holds (or commits to hold) ≥10% of the subsidiary or a cost of at least EUR 1.2m for ≥12 months (Article 166 L.I.R.). Capital gains enjoy the same exemption with a ≥10% or EUR 6m acquisition price condition and the holding-period test (Art. 166 L.I.R. and its implementing Grand-Ducal regulation). Where Article 166 doesn’t apply, a 50% dividend exemption may be available under Article 115(15a) L.I.R. for certain payer types.

Choose your Luxembourg structure and know how it is taxed

1) SARL — private limited liability company

A Luxembourg SARL (société à responsabilité limitée) gives you limited liability and a compact shareholder base. The law allows 1 to 100 shareholders and requires at least EUR 12,000 of capital (Law of 10 August 1915, see Art. 710-5 in the consolidated text: Legilux). For tax, the SARL is opaque: you pay CIT + surcharge, MBT, and NWT, and you can claim the participation exemption when Article 166 LIR conditions are met (10% or EUR 1.2m/6m and the 12-month rule).

2) SA — public limited company

A Luxembourg SA (société anonyme) is built for larger equity stories and listing readiness. The minimum capital is EUR 30,000 and shares are freely transferable under the 1915 law (see SA chapters in the same consolidated text on Legilux). Tax is identical to the SARL (CIT/MBT/NWT with access to Art. 166 LIR).

3) SARL-S — simplified private limited

The Luxembourg SARL-S (société à responsabilité limité simplifiée) lets a founder start light. Capital can be as low as EUR 1 up to EUR 12,000, and specific rules apply to members and managers (Art. 720-4 and following of the 1915 law: Legilux). Tax follows the standard corporate regime; the “simplified” part is corporate-law, not tax.

4) SCS — limited partnership

The Luxembourg SCS (société en commandite simple) has at least one general partner with unlimited liability and one or more limited partners whose risk is capped at their contributions (see partnership chapters in the 1915 law on Legilux). For income tax, the SCS is typically transparent, so partners are taxed directly. The partnership itself may fall within MBT if it conducts a commercial activity. This transparency is reflected in ACD practice for partnerships and civil companies.

5) SCA — partnership limited by shares

The Luxembourg SCA (société en commandite par actions) blends a general partner’s control with share capital for investors. Company-law rules refer back to the SA for many items while keeping the general partner’s unlimited liability (see SCA provisions in the 1915 law on Legilux). For tax, the SCA is treated like a company: you budget for CIT + surcharge, MBT, and NWT.

6) SCI — civil real-estate company

A Luxembourg SCI i(société civile) s a civil company often used to co-own or manage property. For direct taxes, it is generally transparent so partners are taxed on their share, unless the activity becomes commercial and triggers business taxation; you can check the transparency guidance on the ACD site (ACD).

7) SNC (SENC) — general partnership

A Luxembourg SNC (société en nom collectif) makes all partners jointly and severally liable under the 1915 law (see the SNC part in the consolidated text on Legilux). For tax, it is normally transparent; MBT may apply if the partnership trades. This form fits founders who value simplicity and accept unlimited liability.

8) ASBL — non-profit association

A Luxembourg ASBL (Associations sans but lucratif) serves a disinterested purpose and cannot distribute profits. It is governed by the Law of 7 August 2023, which modernised non-profit governance (see the official law on Legilux). Non-lucrative activities generally fall outside corporate taxation, but an ASBL that runs lucrative operations can become taxable; the government portal explains formation and compliance steps (Guichet—ASBL).

9) SPF — family wealth management company

A Luxembourg SPF (société gestion de patrimoine familial) is a private wealth box strictly barred from commercial activity. The vehicle is created by the Law of 11 May 2007 and exists to hold and manage financial assets for private investors (see the consolidated SPF law on Legilux). It pays no CIT, MBT, or NWT; instead it pays a 0.25% subscription tax with a minimum of EUR 1,000 and a cap of EUR 125,000. The rules and payment mechanics are described on the government portal (Guichet—subscription tax).

Practical pointers you can apply today

If you plan to upstream dividends into your holding company, build your shareholding to meet the Article 166 LIR thresholds (10% or EUR 1.2m for dividends, EUR 6m for gains, and a 12-month hold) so the income can be exempt. If you expect to pay dividends out of Luxembourg, check Article 147 LIR to remove the 15% withholding where a qualifying parent is in place (see the LIR consolidation: LIR 2025).

If you launch as a small business, consider the VAT small-enterprise scheme to simplify invoicing and cash-flow. If your structure relies on partnerships, remember that transparency pushes taxation to the partner level while MBT can still bite at the partnership if the activity is commercial.

How Damalion helps you execute

We incorporate SARL, SA, SARL-S, SCS, SCA, SCI, SNC, ASBL and SPF, align governance with the 1915 companies law, and register your taxes with the ACD. We model CIT/MBT/NWT, apply Articles 147 and 166 LIR in your dividend and exit flows, and profile your VAT position from day one. Tell us your investors, capital plan, and deal timeline, and we will deliver the vehicle and tax pathway that matches your goals. We will also help you to open a Luxembourg bank account. Please contact your Damalion experts now.

  

10 best things to do in Luxembourg City during a 24 hours business trip!

1. Knopes Coffee (Centre)
2. Start strong with specialty coffee near Hamilius and clear your inbox before the first meeting. See on map
3. Hotel Le Royal (meetings & lounge)
4. Set up in the business lounge just off Boulevard Royal; it’s central, quiet, and built for deal-making. See on map
5. Um Plateau
6. Lock in a table for a fast, polished lunch and an easy walk back to Ville Haute. See on map
7. Restaurant Clairefontaine
8. Classic fine dining by the namesake square—tailor-made for board-level conversations. See on map
9. Mosconi (Grund)
10. Celebrate a signed term sheet with Italian tasting menus in the riverside quarter. See on map
11. Le Sud (Clausen)
12. Head to the rooftop bar for skyline views and a relaxed debrief with the team. See on map
13. Hôtel Le Place d’Armes
14. Switch to a boutique vibe right on Place d’Armes—ideal for discreet conversations. See on map
15. La Cristallerie
16. When you need white-tablecloth impact, reserve here for seasonal tasting menus. See on map
17. Sofitel Luxembourg Le Grand Ducal
18. Wrap the day with a panoramic view from the top-floor bar—or stay for five-star comfort. See on map
19. Meliá Luxembourg (EU district)
20. Convenient for EU institutions and conference venues, with easy access to Mudam and the park. See on map