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Luxembourg: Domestic Corporate Taxation

Scope of Corporate Income Tax

This page was last updated on 7 July 2020.

Corporate income tax or IRC (French: impôt sur le revenu des collectivités), was introduced during the German occupation in 1940-41. Luxembourger tax authorities decided to keep this German innovation after the war, although it was substantially modified by the Law of 4th December 1967 (Income Tax).

Resident companies are taxed on their worldwide income. Residence for this purpose means that the business has its main establishment in Luxembourg, that is, the place from which it is managed, where it holds its general meetings, and where it performs central administrative functions. Non-resident companies having a 'permanent establishment' in Luxembourg (defined as a place of business or fixed equipment, which would normally include branches) pay income tax on their income originating in Luxembourg.

IRC applies to corporate entities, which includes SAs, SARLs, and partnerships limited by shares (sociétés en commandites par actions). Other types of partnership are considered financially transparent, here as elsewhere, so that tax is assessed directly on the partners rather than the partnership as such.

There are some tax incentives available for investors who are considered to be supporting the economic development of the country under the laws of 28th July 1923, 27th July 1972, and the Tax Reform Law of 6th December 1990. These apply to specified industries and investment situations, and apply equally to Luxembourgeois and foreign investors.

See Offshore Legal and Tax Regimesfor details of the taxes payable by 'holding' companies and Forms Of Company for details of changes to the holding company regime in 2007.

 

 

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