As the largest fund centre outside the US, a recognised EU hub for international banks and insurers, and one of Europe’s core capital market infrastructures, Luxembourg will use these measures to reinforce its position as a leading financial centre, ensuring continued growth and appeal to global investors and financial firms.
The package of measures includes a range of favourable conditions for employees, changes to corporate income tax and an exemption from subscription tax for actively managed ETFs.
An attractive environment for employees:
Expat Regime
Luxembourg’s current expat regime, which allows a partial tax exemption in relation to gross annual remuneration and certain relocation costs, will be replaced and simplified. The new regime will provide for a 50% exemption on gross annual remuneration, capped at €400,000 of gross annual remuneration, and is aimed at attracting highly-skilled experts.
Profit-Sharing Bonus (prime participative)
To foster employee retention, the conditions for Luxembourg’s profit-sharing bonus will be revised. The bonus is increased to 30% of the employee’s gross annual remuneration, and the total amount available for allocation to employees is increased to 7.5% of the company’s profits of the year prior to the allocation.
Bonus for Young Employees
A new bonus regime will be introduced for young employees under the age of 30 who have their first permanent employment contract in Luxembourg. Seventy-five per cent of this bonus, paid by the employer and which can range from €2,500 to €5,000 depending on the employee’s annual remuneration, will be tax-exempt. This complements the rent subsidy tax exemption, introduced in May 2024 alongside additional measures to stimulate the housing market.
Overtime Tax Credit for Cross-Border Workers
A tax credit of up to €700 per year will be available, under certain conditions, to cross-border workers who work paid overtime in Luxembourg.
Advancing Business and the Financial Centre
Reduction in Corporate Income Tax (IRC)
In line with the government’s coalition programme, corporate income tax (IRC) will be reduced by one percentage point:
• From 17% to 16% for companies with taxable income exceeding €200,000;
• From 15% to 14% for entrepreneurs and small businesses with taxable income of €175,000 or less.
A tapering mechanism will apply between these two income levels.
Consequently, the overall tax rate for companies will drop from 24.94% in 2024 to 23.87% in 2025. For small businesses, the rate will fall from 22.80% in 2024 to 21.73% in 2025.
Exemption from Subscription Tax for Actively Managed ETFs
To further diversify the financial centre and encourage new activity, actively managed ETFs will be exempted from the subscription tax from 2025.
New Opportunities for Citizens and Businesses
Luxembourg Finance Minister Gilles Roth explains: « To enhance the attractiveness of Luxembourg and its financial centre, the new tax package reduces corporate income tax and provides an exemption from the subscription tax for actively managed ETFs. Our package also includes a tax toolkit for employers to help them retain talent and attract the skilled individuals Luxembourg needs. In doing so, we are creating a dynamic environment that will drive our growth. In essence, the reforms seek to open up new opportunities for our citizens and businesses, better preparing the country for the future. »