On 17 July 2024, Minister of Finance Gilles Roth announced Luxembourg’s new tax package for individuals and businesses, entitled “Recovery Package. Solidarity. Future. For everyone.” The tax relief package includes 16 new tax measures, including various advantageous provisions for employees, corporate income tax changes and a subscription tax exemption for actively managed exchange-traded funds (ETFs).  

Luxembourg intends to use these measures to strengthen its position as a major financial hub, attract international financial institutions and investors and ensure its future growth. This blog provides a summary of the main tax measures to be introduced, with a focus on corporate taxes.  

Reduction in corporate income tax

The measure seeks to reduce the corporation income tax (“CIT”) rate to enhance firms’ competitiveness in the face of significant changes in the global tax environment and facilitate investment, innovation and job creation.  

In line with the government coalition programme, the Draft Law cuts CIT rates by 1% beginning with the tax year 2025, as follows:  

• Reduction of the CIT rate from 17% to 16% for companies with taxable income exceeding EUR 200,000. 

• Reduction of the CIT rate from 15% to 14% for entrepreneurs and small businesses with taxable income below EUR 175,000. 

This adjustment aims to ensure small businesses are supported and remain competitive by reducing the tax burden across various income groups. Thus, the overall CIT rate of companies will drop from 24.94% in 2024 to 23.87% in 2025, while the rate for small businesses will fall from 22.80% in 2024 to 21.73% in 2025.  

Subscription tax exemption for actively managed ETFs

Starting in 2025, actively managed Exchange-Traded Funds (ETFs) will be exempted from subscription tax. These stock exchange-traded investment funds provide asset managers with an extra distribution channel to reach more investors.  With the rapid growth of the ETF market, the proposed measure aims to encourage its development and competitiveness on the European and global financial scenes.  

Amendments for family asset management company (“SPF”)

SPFs are fully exempt from corporate income tax and net wealth tax under the current Luxembourg income tax law, but they are subject to an annual subscription tax.  

In order to reduce the possibility of misuse of the SPF, the new measures would raise the minimum annual subscription tax amount and allow the Luxembourg indirect tax authorities to impose higher penalties on SPFs if certain requirements are not met. In some cases, this could result in the SPFs’ tax status being withdrawn.   

To conclude, the newly announced Luxembourg tax package aims to offer significant relief to both individuals and businesses. These tax measures seek to support the country’s financial sector, ensuring competitiveness. However, under the usual legislative process, the tax measures may be subject to further amendments.  

For more information or any questions, please do not hesitate to contact our Luxembourg team.  

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