Luxembourg's 2025 tax reform marks a pivotal step in balancing global compliance with local advantage. Key measures include:
- Lowering the corporate income tax rate to reinforce Luxembourg's competitiveness as an international financial center.
- Clarifying the tax treatment of partial liquidations, providing greater legal certainty for investors and corporate structuring.
- Introducing an annual opt-out from participation exemption regimes, enabling taxpayers to better manage interactions with Pillar Two requirements.
- Modernizing indirect and wealth tax rules, including VAT clarifications for directors' fees and a progressive minimum net wealth tax scale.
- Enhancing fund and investment vehicle regimes with updated interest deduction limitation rules and the introduction of the Single Entity Group concept—particularly relevant for securitisation vehicles—alongside a new subscription tax exemption for actively managed ETFs.
- Boosting individual tax attractiveness through adjustments to the personal income tax scale and a simplified, more accessible inpatriate regime.
- Aligning with Pillar Two standards and advancing the digital transformation of the tax administration to streamline compliance and increase efficiency.
These reforms further strengthen Luxembourg's position as a premier, responsive investment hub, offering clarity and opportunity for international stakeholders.
In this article, Guilhèm Becvort, White & Case partner, and Pierrick Romancant, associate, analyze the implications and practical impact of Luxembourg's latest tax reforms.
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