Taxes

Investment tax credit in Luxembourg 2025

This article provides a comprehensive overview of the investment tax credit in Luxembourg, highlighting the key changes that have been implemented in 2024. It also offers insights into the eligibility criteria and the potential tax rebates.

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The investment tax credit Luxembourg — one of the forms of support for local companies that are ready to invest their funds in digital transformation, environmental or energy transition. In the article, we tell you who can apply for the benefit, what requirements are imposed on companies, as well as about the rates and the application process.

What is the investment tax credit in Luxembourg

The investment tax credit (ITC) is a special tax benefit that allows companies to deduct a certain percentage of investment costs from their tax liabilities. By paying investment tax credit to companies, the state pursues special goals.

Feauters goals for investment tax

Stimulating investments

Stimulating investment in new projects and products

Stimulating the economy

Stimulating the Luxembourg economy as a whole: companies receive additional money for development and projects

Increasing revenues

More revenue through taxes paid by companies and individuals participating in new projects

Stimulating transition

Stimulating the energy and environmental transition and increasing competitiveness.

In December 2023, the Grand Duchy adopted a bill to reform the ITC. The law entered into force in January 2024.

The benefits of the investment tax credit:

Lower tax liability. The investment tax credit reduces the final corporate income tax due and can be carried forward for 10 years
Supports sustainability: reducing the level of harmful impact of industrial enterprises on the environment
Digital transformation: companies are actively developing and introducing new technologies.

Companies seeking commercial profit may take advantage of the right to receive investment tax credits. To receive the benefit, a company must meet several conditions. Firstly, the investment should be managed by an institution situated in Luxembourg with the intention of remaining permanently. Secondly, the investment must be used in Luxembourg or one of the countries included in the European Economic Area and meet the criteria of durability.

The following applicants or companies may receive the benefit:

Commercial enterprises
Industrial companies
Mining businesses
Craft businesses (within the meaning of Article 14 L.I.R.)

Types of investment tax credits in Luxembourg

According to the updated Article 52bis of the Luxembourg Income Tax Law (LITL), from January 2024, companies can receive two types of investment tax credit.

The investments can be split in the following two ways:

Global ITC for investments made during the financial year.
Investments can be made in tangible assets except buildings, livestock and mineral deposits, and software acquired from a non-affiliated person. ITC is calculated at a rate of 12% regardless of the amount of investment.
ITC connected with digital and ecological transformation applies to investments in depreciable tangible assets, software, support services costs, personnel engaged in the digital transformation or energy and environmental transition.
The new ITC is calculated based on the acquisition price or cost of the relevant investments or expenses incurred during the financial year at a rate of 18%.

Legal framework for investment tax credit in Luxembourg

Obtaining an investment tax credit is subject to certain requirements. Taxpayers must first assess whether they are entitled to receive the new investment tax credit and document this entitlement.

Which requirements have to be met:

Key regulations

The investment tax credit is granted to companies that invest in tangible assets. The ITC is calculated as a percentage of the investment amount and can be used to offset corporate income tax liabilities. The regime has two components that can be applied simultaneously.

Tax reforms

The 2024 reform abolished the additional ITC and introduced a new ITC in its place for investments and operating expenses for participation in the digital, environmental and energy transformation. In addition, the threshold of 150,000 euros for the global investment tax credit has been abolished and a flat rate of 12% has been introduced.

Eligibility criteria

The new law specifies a list of purposes that investments must meet for a company to be eligible for the investment tax credit. The objectives of the ecological transition, for example, include increasing the energy efficiency of the production process and saving at least 20% of the energy used or reducing greenhouse gas emissions by at least 40%. Assets depreciated over a period of less than 3 years, self-propelled vehicles and investments that were aimed at meeting the requirements of environmental legislation or other regulations are excluded.

Comparison with other European countries

Investment tax credit exists in many European countries. In most of them, it is also aimed at supporting companies that are willing to invest in the development of green energy and digital transformation projects.

A comparison between Luxembourg and other European countries about the ITC rates implemented in each country

Country	ITC Rate	Focus	Eligibility criteria
Luxembourg	18%	Digital/Ecological Projects	Companies with permanent presence in Luxembourg
Germany	25%	Innovations only	Local investment
France	20%	Green industry	Companies registered in France
Belgium (from January 1, 2025)	10% - 20,5%	Digital/ Ecological Projects	Belgian companies or permanent establishments of foreign companies in Belgium
The Netherlands	27% - 40% (minimum investment amount 2,500 euros)	Energy-efficient/ environmental assets.	The company is registered in the Netherlands, Aruba, Curaçao, St. Maarten or the special Dutch municipalities Bonaire, St. Eustatius or Saba.

How to apply for investment tax credit in Luxembourg

The application process for an investment tax credit depends on its type. If a company is applying for a Global ITC, it is sufficient to submit a special application to the Luxembourg Inland Revenue (ACD) together with the income tax return. The application form is provided by ACD.

If a company wants to receive an investment tax credit for a digital transformation project or an environmental and energy transition, then the income tax return will not be sufficient. It is also necessary to obtain a certificate that confirms the fact of investment and operating expenses during the tax year and their amount.

To get this certificate the following steps are necessary:

The first step is to submit an application to the Ministry of Economy for attestation of eligibility. To do this, a special form on the MyGuichet.lu website has to be filled in.
The procedure requires authentication to make it valid. The application must indicate the start and end dates of the project and describe the planned investment. The maximum review period is 3 months from the date of receipt of the application.
Submitting an application for a certificate to the Ministry of Economy.
The certificate is usually issued as soon as possible, no later than 9 months after the end of the operating year during which the investments were made.

If your company really wants to invest in digital transformation projects or green energy projects, then Luxembourg is ready to provide attractive working conditions and support the company with benefits and deductions.