Luxembourg Prepares New Start-Up Tax Credit

The scheme proposes a tax credit equivalent to 20% of the invested amount, with a minimum investment set at 10,000 EUR. The maximum amount that can be obtained is capped at 100,000 EUR per year per taxpayer.

This mechanism targets both resident and assimilated non-resident individuals, with founders and employees of the start-up being excluded. In case the tax benefit cannot be immediately applied, it may be carried forward to subsequent years.

 

Eligibility Criteria for Start-Ups

For an investment to qualify for the tax credit, the start-up must meet several criteria. It must be fully taxable in Luxembourg or have a stable establishment in another EU/EEA member state. The company must also:

• Have been established for less than five years;
• Employ fewer than 50 employees;
• Have a balance sheet or turnover of less than 10 million EUR;
• Have incurred research and development expenses.
   

Certain activities are explicitly excluded by the law. Additional rules apply if the company is part of a group, to ensure the defined thresholds are respected.

 

Obligations for Investors

Investors must subscribe to shares either at the company’s creation or during a capital increase. The investment can be made directly or through a tax-transparent structure. They must also:

• Retain the shares for at least three years, with the risk of losing the credit if this condition is not met (except for limited exceptions);
• Not be a founder or employee of the start-up;
• Limit to 30% the share of capital used for the tax credit calculation.
   

Furthermore, the total amount of eligible investments by all investors in a single start-up cannot exceed 1.5 million EUR.

Practical Details and Next Steps

The tax credit must be claimed in the annual tax declaration, and taxpayers will be required to maintain this obligation for three years after the investment. The bill is still evolving based on the opinions of the Council of State. The government is also working on other measures to strengthen the start-up ecosystem, including a planned reform of the stock option regime.