LUXEMBOURG
Book Your Free ConsultationThe Grand Duchy of Luxembourg is a small, landlocked country located between France, Germany and Belgium. It is a major seat of the EU and hosts the EU courts of justice. It is also a major banking, financial services and tax planning jurisdiction. It is one of the wealthiest countries in the world and one of the original 6 member states of the EU (formally the European Economic Community or EEC).
Population: 690,947 (2025)
Size: 2,586.4 sq.km.
Capital: Luxembourg City
Economy: It has the highest per capita income in the world at US$141,079.00, a founding member of the EU and has extensive double taxation treaties.
WHY & FOR WHOM?
WHY? Luxembourg is the original ‘tax haven’ within the European Union with its companies having been long employed within tax planning ‘sandwiches’ particularly in conjunction with Dutch NV and BV companies. The reason it is so popular especially for multi-nationals is that local companies with the correct fiscal election – In Luxembourg there are only two major companies; sociétés à responsibilité limitée (Sàrl’s) and sociétés anonyme (SA’s) – can be very tax efficient.
Benefits
- Pro-business environment
- Highly respectable and credible jurisdiction
- Highly educated population
- Highly developed corporate and general law
- Excellent communications with the rest of Europe including close geographical proximity to Belgium, The Netherlands, Germany and France
- Active and positive member of the European Union
- Fully benefits from all EU Directives and Regulations
- It is one of the initial 11 Euro zone countries
- Excellent double taxation treaty network especially with the Netherlands
- Few scandals
- Luxembourg is the base for Europe’s largest international financial services centre (IFSC) with Dublin coming in a close second
- Very sophisticated banking and corporate law together with a large ‘pool’ of highly trained multilingual professionals
- SOPARFI’s are fully covered by Luxembourg’s tax treaties and can also avail of the EU Parent/Subsidiaries’ Directive
- Bearer’ shares can be provided for SA companies
- Luxembourg’s banking community have maintained much of their confidentiality code despite recent attacks on its veracity by Germany. In addition, bank account facilities can be maintained outside of the Luxembourg jurisdiction
Double Taxation Treaty Network
The key benefit is that Luxembourg has an extensive and very favourable tax treaty network with most European countries despite its favourable holding company structures especially with the Netherlands and its NV and BV companies.
FOR WHOM? Luxembourg companies are not for everyone as they are expensive to both set-up and maintain. However, for the right often multi-national client they offer unparalleled advantages.
LUXEMBOURG MANAGED COMPANIES
Synopsis
Luxembourg is the original ‘tax haven’ within the European Union with its companies having been long employed within tax planning ‘sandwiches’ particularly in conjunction with Dutch NV and BV companies. The reason it is so popular especially for multi-nationals is that local companies with the correct fiscal election – In Luxembourg there are only two major companies; sociétés à responsibilité limitée (Sàrl’s) and sociétés anonyme (SA’s) – can be very tax efficient. In addition, Luxembourg is a founder member of the EU and by definition will fully benefit from all key EU Directives and Regulations (see below) not to mention its remarkably developed tax treaty network. The Duchy of Luxembourg was originally founded in 963 and was one of the six founding members of what is now called the European Union. Although being one of the smallest EU members it is by far the wealthiest with a per capita GDP of over US$141,079.00 (2025 est.) and within the top five wealthiest countries in the world. Luxembourg’s wealth derives from a highly developed and industrialised economy combined with a very powerful banking and financial sector making it a true and long-established competitor to Switzerland. From a tax planning perspective, the Luxembourg Sociétés de Participation Financière (SOPARFI’s) tax election (applicable to both Sàrl’s and SA’s) are very popular amongst medium to large companies because they are well regulated, benefit from an excellent local tax treaty network and of course key EU Directives such as the Parent Subsidiary Directive 90/435 (which allows dividend payments to be paid between EU member states without any withholding taxes) and Directive 03/49, which basically does the same but for interest rather than dividend payments within the EU. The only major downside is that Luxembourg companies (be they trading or as is more usual holding SOPARFI companies) are, not unexpectedly, expensive to set-up and to administer.
Location
Luxembourg is located in North-West Europe bordered by France, Belgium and Germany.
Double Taxation Treaty Network
The key benefit is that Luxembourg has an extensive and very favourable tax treaty network with most European countries despite its favourable holding company structures especially with the Netherlands and its NV and BV companies.
LUXEMBOURG CORPORATE & VAT RATES 2026
Luxembourg taxes its resident companies on their worldwide income and non-resident companies only on Luxembourg sourced income.
BASIC FACTS: In synopsis, the corporate tax rate in the Luxembourg is as follows:
STANDARD COMPANY RATES OF TAX
Companies with a taxable income of less than €175,000.00 are subject to a corporate income tax (CIT) of 15%. For companies with a taxable income between €175,000.00 and €200,001.00 are subject to CIT of €24,500.00 plus 30% of the tax base above €175,000.00. The CIT rate for companies with a taxable income of more than €200,000.00 is 16% giving an overall tax rate of 23.87% in Luxembourg City. This includes a 7% solidarity surtax and a 6.75% municipal business tax rate, similar to those in the UK. CIT does not however apply to tax transparent entities such as partnerships.
CAPITAL GAINS TAX
CGT only applies in Luxembourg where assets have been held for less than 6 months. Where the assets have been held less than 6 months the rates vary between 0% to 45.78% where the gains are more than €500.00.
VALUE ADDED TAX (Variable Rates)
The standard rate of VAT in Luxembourg is 17% (the lowest standard rate in the EU). However, there are also lower rates for certain wines, securities at 14% and an even lower rate of 8% on certain utility supplies.
For more information on Luxembourg Company Formation services, please speak to a tax planning consultant.