Luxembourg tables the 2027 Budget Bill – key tax measures

On 7 October 2026, the Luxembourg government submitted to Parliament the Bill concerning the State revenue and expenditure budget for the 2027 financial year (the “Bill”), which also amends several tax laws, including the Luxembourg Income Tax Law (the “LITL”) and the law on the municipal business tax.

Beyond the budgetary figures, the Bill contains a series of targeted tax measures affecting notably corporate taxpayers, individuals, and the real estate sector. The main measures are summarised below.

Corporate income tax rate reduction

• The Bill proposes a further reduction of the corporate income tax (CIT) rate. Currently, the CIT rate is 14% where taxable income does not exceed EUR 175,000 and 16% where taxable income exceeds EUR 200,000, with a smoothing mechanism applying in between.
• As from tax year 2027, the maximum CIT rate would be reduced from 16% to 15%, applicable where taxable income exceeds EUR 250,000, while the rate applicable to taxable income not exceeding EUR 200,000 would be reduced from 14% to 13%. The smoothing bracket applying an intermediate marginal rate of 23% would be shifted from the EUR 175,000–200,001 range to the EUR 200,000–250,001 range.
• For a company with its registered office in Luxembourg-City, the aggregate corporate tax rate (combining CIT, the solidarity surcharge, and the municipal business tax) will be reduced from 23.87% to 22.80%.

Uncapped loss carry-forward

The 17-year cap on the carry-forward of tax losses for income tax and municipal business tax purposes would be abolished. Currently, losses incurred between 1 January 1991 and 31 December 2016 already benefit from an unlimited carry-forward; the Bill would extend this unlimited carry-forward to losses incurred after 31 December 2016.

Personal income tax and investment incentives

• The holding period used to determine whether a capital gain on movable property (including carried interest) is taxed as speculative income would be extended from six to twelve months, for both resident and non-resident taxpayers.
• The personal income tax scale would be adjusted for tax year 2027 by one additional index bracket compared to the 2026 scale, broadly corresponding to a multiplication factor of around 1.025, with consequential adjustments to the tax credit mechanism for class 1a taxpayers.
• The tax credit for the hiring of unemployed persons would be extended for three additional years, until the end of 2029.
• The investment tax credit rates would be increased: from 18% to 21% for investments and operating expenses linked to the digital transformation or the ecological and energy transition of the business, and from 6% to 9% for other qualifying investments.
• The tax relief for dependent children in the case of alternating custody is extended for one additional year, up to and including the 2027 tax year.

Real estate

• The accelerated depreciation rate available for buildings or parts of buildings used for rental housing (Article 32ter LITL) would be increased from 4% to 6%, applicable where the depreciation base value does not exceed EUR 600,000 and the building was completed less than 6 years (instead of 5 years) before the start of the operating year.
• The same 6% rate would apply to renovation expenditure on older rental housing exceeding 20% of the acquisition or construction cost, subject to the same EUR 600,000 threshold and completion-age condition.
• Transitional rules would preserve the existing 4% rate for buildings acquired or constructed between 31 December 2020 and 1 January 2026, and for buildings acquired or constructed between 31 December 2025 and 1 January 2027 that exceed the EUR 600,000 threshold.
• It is noteworthy that a withholding tax mechanism applicable to real estate capital gains is expected to be introduced as from tax year 2028, with the tax due on such gains to be levied at the time of the transaction rather than through self-assessment by the beneficiary. This measure is referred to in the budgetary commentary only and is not yet reflected in the Bill's amending provisions.

Employers and employees

• The Bill would remove the obligation on employers to file a nominative list of employees benefiting from the profit-sharing bonus and the impatriate regime, on the basis that the relevant information is already available to the Luxembourg direct tax authorities through electronically filed salary statements. 
  The flat-rate taxation regime applicable to temporary agency workers would be tightened. The maximum gross hourly wage threshold for eligibility would be reduced from EUR 25 to EUR 21, and a single flat rate of 7.5% would be replaced by two distinct rates: 6.5% where the agreed gross hourly wage does not exceed EUR 19, and 8% where it exceeds EUR 19 but does not exceed EUR 21. Above EUR 21, ordinary progressive taxation would apply.

Announcement on tax-exempt business transfers

To safeguard family-owned businesses and support the craft sector, the Government announced that the transfer of a business by way of donation in a direct line or to a partner will be fully tax-exempt. While the exact operational modalities are yet to be specified in upcoming legislation, this measure aims to facilitate seamless corporate successions.

Next steps

The Bill is currently at draft stage before the Chamber of Deputies and is expected to be referred to the Council of State for its opinion. As with every budget bill, its provisions may still evolve during the legislative process. Most tax measures are expected to take effect from tax year 2027. We will closely monitor these legislative updates and continue to keep you informed of further developments.