On 7 October 2026, the Luxembourg Minister of Finance presented the country’s 2027 Budget, including a series of proposed tax measures aimed at strengthening Luxembourg’s competitiveness and supporting investment. The proposals include a lower corporate income tax rate, the indefinite carry-forward of tax losses and changes to the holding period applied to certain capital gains exemptions.
While the measures remain subject to the legislative process, businesses and investors should begin considering how they could affect existing structures, future transactions and longer-term planning.
A proposed reduction in corporate income tax
One of the most significant measures is a proposed 1% reduction in Luxembourg’s corporate income tax rate from 2027.
For companies established in Luxembourg City, the combined nominal corporate tax rate would consequently decrease from 23.87% to 22.80%. The change is intended to enhance Luxembourg’s attractiveness as a business and investment jurisdiction.
For groups operating through Luxembourg entities, the reduction could influence financial projections, tax provisioning and the assessment of future investments. However, its impact will depend on each organisation’s structure, activities and wider tax position.
Indefinite carry-forward of tax losses
The Budget bill also proposes removing the current 17-year limitation on the carry-forward of tax losses generated from the 2017 financial year onwards. If approved, qualifying losses could therefore be carried forward indefinitely.
This could provide greater flexibility for companies with longer investment horizons or business models where profitability develops over an extended period. It may be particularly relevant to holding structures, investment platforms and businesses making significant initial investments before generating taxable income.
Companies should consider reviewing their existing tax-loss positions and the supporting records available, as the ability to carry losses forward remains dependent on the applicable tax rules and the circumstances of the relevant entity.
A longer holding period for certain capital gains exemptions
The proposals would increase the minimum holding period for certain capital gains exemptions from six to twelve months. The change would affect both resident and non-resident taxpayers.
For non-resident investors, it may be particularly relevant where Luxembourg has domestic taxing rights over a gain arising from a substantial participation of more than 10% and the applicable double tax treaty does not prevent Luxembourg from exercising those rights.
The extended period could have implications for transaction timing, reorganisations and planned exits. Investors and companies considering the disposal of a participation should therefore assess the proposed requirements early in the transaction-planning process.
Additional measures supporting investment and innovation
The Budget also includes an extension of the investment tax credit for investments connected with the digital and energy transition. The relevant rate would increase from 18% to 21%. A new tax framework for employee stock options in innovative businesses has also been proposed.
These measures complement other initiatives previously announced in Luxembourg, including changes relating to the expatriate regime, participation bonuses, carried interest and incentives for start-ups.
Together, the proposals indicate a continued focus on maintaining an attractive environment for internationally active businesses while encouraging digitalisation, innovation and energy-transition investment.
Preparing for the potential changes
Although the measures must progress through the legislative process, organisations with Luxembourg operations or investment structures should begin evaluating their potential implications.
Key areas to consider include:
- modelling the effect of the proposed corporate income tax reduction;
- reviewing available tax losses and the documentation supporting them;
- assessing whether planned disposals meet the proposed twelve-month holding period;
- considering the timing of restructurings, acquisitions and exits; and
- identifying planned digital or energy-transition investments that could qualify for the enhanced investment tax credit.
Any analysis should take account of the final legislation, the circumstances of the relevant entities and the interaction with applicable double tax treaties and international tax rules.
Supporting Luxembourg structures through regulatory change
Changes in tax legislation can have consequences beyond the tax calculation itself. They may affect accounting, reporting, governance, transaction planning and the ongoing administration of Luxembourg entities.
Centralis supports international businesses, investment managers and asset owners with the accounting, tax compliance, corporate administration and governance requirements of their Luxembourg structures. Its integrated service model is designed to connect these responsibilities across the entity lifecycle while working alongside clients’ legal and tax advisers.
As the 2027 Budget progresses, early coordination between tax advisers, internal teams and service providers will be important to ensure that approved measures are reflected appropriately in financial planning and entity administration.
Disclaimer: This article is provided for general information only and does not constitute legal, tax or investment advice. The proposed measures remain subject to the Luxembourg legislative process. Organisations should obtain advice based on their individual circumstances before taking any action.