Grants and Tax Incentives

Are grants or tax incentives available for companies establishing a business in your jurisdiction?

 

Luxembourg tax law provides for various incentives in the areas of risk capital, audio-visual activities, environmental protection, R&D, professional training, and recruitment of unemployed persons.

 

Amongst the most popular tax incentive are the tax credit for investments. Eligible assets primary consist of depreciable tangible goods other than buildings, livestock and deposits and vessels operating in international traffic. A global investment tax credit is available on the acquisition price of investments made during the year, which amounts to 8% for the first EUR 150,000 of such expenditure and 2% on the excess over EUR 150,000.

 

Luxembourg is also a domicile of choice for cross-border distribution of investment products. In particular, Luxembourg investment funds may benefit from a wide range of deductions or exemptions: non taxation on income and capital gains, no withholding tax no net wealth tax. Only a subscription tax and the minimum net worth tax may apply to a fund i.e. EUR 4,815 per year as minimum net worth tax.

 

In addition, a company in Luxembourg which carries out innovative and R&D activities can benefit from financial support such as innovation loans which may carry a fixed interest lower than the market rate.

 

It is worth noting that the Luxembourg parliament has deposited a new draft bill which currently envisages introducing a new intellectual property regime (“IP”), which should replace the prior IP regime which was repealed as from 1 July 2016 and allowed a tax exemption on 80% of the net income and capital gains derived or deemed to be derived from a wide variety of IP.

 

This new IP regime, limited to patent and software rights, should reinforce research and development activities in Luxembourg and stimulate the R&D spending of foreign investors in Luxembourg.