Luxembourg’s tax system distinguishes between corporate residents and non-residents. While corporate residents are required to pay taxes on their worldwide income, corporate non-residents are only taxed on their Luxembourg source of income, i.e. income originating within Luxembourg’s borders.
The corporate income tax (CIT) rates in Luxembourg are structured in a progressive manner. Businesses with taxable income up to €175,000 are subject to a CIT rate of 15%. For businesses falling within the income range of € 175,000 to € 200,001, the calculation becomes slightly more complex. These entities face a base tax of EUR 26,250, with an additional 31% applied to the portion of their taxable income exceeding €175,000 but lower than €200,001. Companies earning taxable income beyond € 200,001 are subjected to a CIT rate of 17%.
The above rates collectively contribute to an effective tax rate of 24.94% in Luxembourg City, which includes factors like the solidarity surtax of 7% on the CIT rate and the municipal business tax rate of 6.75%. Overall, Luxembourg’s corporate tax system aligns with the principles of fairness and economic development, positioning the country as an attractive destination for businesses seeking to establish a presence in Europe.
Looking for starting business in Luxembourg? Want to know more about its Corporate Taxation Rules? Drop us an email at (firstname.lastname@example.org) or give us a call (+44 20 3974 1244) at any time for assistance on your doing business in Luxembourg.