Luxembourg Budget 2027: proposed tax measures for businesses and investors

On 7 October 2026, the Luxembourg Government submitted its draft 2027 Budget Law to the Chamber of Deputies. The package proposes changes to corporate taxation, investment incentives, capital gains and personal income taxation. The proposals are not yet enacted and remain subject to the legislative process.

Key takeaways

• Corporate income tax: the top CIT rate would decrease from 16% to 15%, bringing Luxembourg City’s combined rate from 23.87% to 22.80%.
• Loss relief: qualifying tax losses incurred since 1991 would become available for indefinite carryforward, including for municipal business tax.
• Capital gains: the speculative-gain holding period for movable assets would increase from six to twelve months, without a grandfathering rule for assets acquired in 2026.
• Investment incentives: qualifying digital and green transformation expenditure could benefit from an enhanced 21% investment tax credit.

Corporate taxation

1. Lower corporate income tax rates

From tax year 2027, the corporate income tax (CIT) rate would decrease from 16% to 15% for taxable profits above EUR 250,000, and from 14% to 13% for profits up to EUR 200,000. An amended intermediate formula would apply between those thresholds. For a company in Luxembourg City with taxable profits above EUR 250,000, the combined nominal CIT, solidarity surcharge and municipal business tax rate would reduce from 23.87% to 22.80%. The new rate should be considered alongside relevant interest limitation, participation exemption minimum-tax testing, Pillar Two ETR and safe harbor, deferred tax assets and valuation allowance calculations.

2. Indefinite tax loss carryforward

The draft would abolish the 17-year limitation currently applicable to losses incurred in financial years closed after 31 December 2016. Qualifying losses from financial years closed after 31 December 1990 would therefore be carried forward indefinitely, for both CIT and municipal business tax. The other statutory conditions for preserving and using tax losses would continue to apply. This could be significant for holding, financing and development-stage structures with extended loss-making periods. Deferred tax asset recognition under IFRS (IAS 12) and US GAAP (ASC 740), including valuation allowance reassessments, will need to be analysed.

3. Enhanced investment tax credits

The credit for qualifying digital transformation and ecological or energy transition investments and expenses would increase from 18% to 21%. For eligible depreciable tangible assets, the specific credit would increase from 6% to 9%, potentially combining with the ordinary 12% investment credit to reach an aggregate 21%. Existing eligibility and documentation requirements would remain important.

Capital gains and cross-border investors

4. Speculative gains: a longer holding period

The holding period for determining speculative gains on movable assets (including shares and certain co-investments) would increase from six to twelve months. This is particularly relevant for disposals by Luxembourg-resident individuals and, in certain circumstances, non-resident individual or corporate shareholders disposing of a substantial participation (more than 10%) in a Luxembourg company, where an applicable tax treaty does not prevent Luxembourg taxation. The draft also includes consequential amendments concerning carried interest. The proposed rules contain no grandfathering protection for investments made in 2026 and disposed of in 2027 within twelve months of acquisition.

Individuals, employers and residential property

5. Personal income tax and employment measures

The personal tax scale would be adjusted to reflect 2.5 index tranches, alongside changes to tax class 1a. The maximum CO₂-related tax credit would rise from EUR 216 to EUR 240. Separate beneficiary list notifications for the profit-sharing bonus (prime participative) and impatriate regimes would be eliminated, while applicable electronic reporting and substantiation requirements remain. The proposals also address temporary agency workers, shared-custody tax relief and housing savings deductions.

6. Rental residential property: accelerated depreciation

For qualifying rental housing, the draft would increase accelerated depreciation from 4% to 6% and extend the qualifying age period from five to six years, subject to a EUR 600,000 reference value cap at completion and other conditions. Qualifying substantial renovations could also benefit. Transitional protections are envisaged for certain existing investments. Importantly, these provisions are proposed to apply from tax year 2026, rather than 2027.

7. Other measures and announcements

The employer tax credit for hiring qualifying unemployed individuals would be extended until 31 December 2029. A possible tax exemption for certain transfers of businesses by gift was also announced, but detailed legislative provisions remain to be confirmed. Other housing measures are covered by separate legislative proposals and should not be treated as part of Bill No. 8800.

Legislative timetable and proposed effective dates

• 7 October 2026 — draft Budget Law (Bill No. 8800) deposited in Parliament
• October–December 2026 — parliamentary committee examination, opinions and possible amendments
• Mid-December 2026 — parliamentary vote targeted in the Chamber’s published budget timetable
• Tax year 2027 — general proposed application of the principal measures
• Tax year 2026 — proposed application of the revised residential depreciation rules

The timing is indicative: the law may be amended before the parliamentary vote and its publication. No proposed measure should be treated as effective until the relevant legislation is adopted.

How can CM Law assist?

CM Law assists Luxembourg businesses, holding and financing companies, investment vehicles and private clients in modelling the impact of tax reforms, reviewing available tax attributes, evaluating prospective acquisitions and disposals, and assessing the feasibility of investment incentives. We follow the legislative process and can help clients determine whether advance action is warranted under the draft rules.