Published on 22 December 2025, the law of 19 December 2025 amending the amended law of 4 December 1967 on income tax aims at promoting the financing of innovative start-ups. To this end, a tax credit amounting to 20% of the investment made in such companies, up to a limit of €100,000 for a tax year, has been introduced in Luxembourg law.
Why was this tax credit introduced?
· Between 2008 and 2021, nearly 30% of the “unicorns” created in Europe left the Internal Market, the vast majority of them to set up in the United States of America.
· Financing start-ups during their early years is one of the main drivers of growth for these entities.
· This initiative also makes it possible to mobilize private savings, which are currently underutilized in financing the European economy.
What conditions must the company meet?
· Company resident fully taxable or company resident in another member state of the Agreement on the European Economic Area (EEA) fully taxable at a rate corresponding to corporate income tax and having a permanent establishment in Luxembourg.
· Share company or cooperative company established less than five years ago, with fewer than fifty employees and whose balance sheet total or turnover does not exceed €10,000,000.
· Company carrying out an innovative activity, meaning that (i) at least two persons work full time for the start-up entity and (ii) the start-up entity has incurred research and development expenses representing at least 15% of its total operating expenses during at least one of the three financial years preceding the tax year for which the start-up tax credit is requested.
· Tax credit may be claimed on qualifying investments up to €1,500,000 per company.
What conditions must the investor meet?
· Resident or assimilated non-resident natural person.
· Acquisition of the participation at the time of the incorporation of the company or during a capital increase.
· Direct and fully paid up in cash participation at the end of the tax year.
· Neither an employee nor a founder of the start-up.
· Total amount invested of at least €10,000 per start up.
· Holding 30% maximum of the share capital of the start-up.
· Uninterrupted holding of the participation for three years.
When does this tax credit apply?
This new start up tax credit is applicable from the 2026 tax year.
