Investment tax credit in Luxembourg: 12%, 18% and going digital

In short. Since tax year 2024, the investment tax credit in Luxembourg (article 152bis of the Income Tax Law) has two parts. A global part of 12% of the value of eligible investments, raised to 14% for assets qualifying for special depreciation. And a new part of 18% for investments and expenditure tied to digital transformation or the ecological and energy transition. This is not a cash grant: it is a direct reduction of the corporate income tax your company owes. A well-structured Odoo project can fall under the 18% part.

Many directors know the digitalisation grants that reimburse part of a project. Few know that a second scheme, a tax one, cuts the tax of the company that invests. The two are not the same thing, and the second was thoroughly overhauled at the end of 2023. Here is how the investment tax credit works in Luxembourg, with its real rates, what qualifies, the procedure, and what an ERP project can expect from it.

What is the investment tax credit?

The investment tax credit is exactly that, a credit: an amount subtracted directly from the corporate income tax (CIT) the company owes. It rewards productive investment made in Luxembourg. Unlike a deduction, which reduces taxable profit, the credit reduces the tax itself, euro for euro. It is governed by article 152bis of the Income Tax Law (L.I.R.).

The scheme was modernised by the law of 19 December 2023, applicable from tax year 2024. The reform did two things: it raised the rate of the historic part, and it created a specific part for digital transformation and the ecological and energy transition. In passing, the former complementary credit of 13% was abolished.

The two rates since 2024

Remember two figures, 12% and 18%, and the logic that separates them.

The mechanics of the digital and green part deserve a sentence. On intangible and operating expenditure (software, a consulting engagement, staff training, the time of your employees assigned to the project), the rate is 18%. On an eligible tangible depreciable asset that forms part of the project, the rate for this part is 6%, but it adds to the 12% of the global part, for a total that can also reach 18%.

Tax credit or grant: don't confuse them

This is the most common confusion, and it changes everything in a financing plan. A digitalisation grant such as SME Packages - Digital is a subsidy: the Ministry of the Economy reimburses a percentage of eligible costs, in cash, after the fact. The tax credit pays out nothing: it reduces the tax your company owes on its profits.

Two practical consequences. First, the grant benefits any eligible company, profitable or not; the credit only helps immediately a company that has tax to pay. Second, the two schemes do not target exactly the same perimeter, and how they interact is checked case by case: expenditure already subsidised does not necessarily give rise, for the grant-funded portion, to the credit. You do not stack them mechanically, you optimise. This is precisely the kind of trade-off that is prepared before committing to the project, not at filing time.

What qualifies, and what does not

The global part covers depreciable tangible assets used in the business and intended to remain durably in Luxembourg or the European Economic Area. The digital transformation and ecological transition part widens the base considerably, since it includes intangible and running expenditure.

• Eligible under the digital and green part: software and patents (not acquired from a related enterprise), rights to use patents or software, consulting, diagnostic and technical support services, staff costs directly assigned to the project, training expenses for the staff concerned.
• Excluded: assets depreciated over less than three years, motor vehicles (with exceptions), buildings, and investments mandated solely by environmental legislation.

The digital or ecological transformation project cannot, moreover, span more than three consecutive financial years, and the investments must be physically carried out in Luxembourg or the EEA and serve the company's production tool or services.

Does an Odoo project fall under digital transformation?

This is where the subject turns concrete for an SME digitalising its management. An ERP project brings together exactly the items the 18% part targets: a software licence, an integration and consulting engagement, user training, and the time of the staff mobilised on the project. On paper, an Odoo deployment that moves a company from a stack of scattered files and isolated tools to a single management system ticks the right boxes of digital transformation.

Let us be plain, though: eligibility is never automatic. It is a certificate, issued after review of the project, that determines what enters the base. A clear Odoo quote, priced line by line, with a written scope and timetable, is not only good purchasing practice: it is the document on which the file is built. A project described as "time and materials, as needs arise" is far harder to have certified. How the project is written matters as much as the project itself.

The procedure: the eligibility certificate

For the digital transformation and ecological transition part, the credit runs through a certificate. In practice, the application for an eligibility certificate is filed via MyGuichet.lu; the Ministry of the Economy (and, for the environmental part, the relevant ministry) reviews the file and issues the certificate. The certificate application must be made within two months of the close of the financial year in which the investments and expenditure were made. The credit is then entered in the company's tax return.

The global part, by contrast, needs no such certificate: it applies to eligible tangible assets and is supported by the accounts. Hence the importance of clean bookkeeping that clearly identifies the year's investments: it is the accounts that document the base and secure the credit in the event of an audit.

A worked example

Take a services company subject to CIT that deploys an ERP. The project, certified as digital transformation, brings together eligible expenditure of 30,000 €: licence, integration and consulting, user training, internal time assigned. At the 18% rate, the credit comes to 5,400 €, subtracted directly from the corporate income tax due for the year.

Two honest caveats. The amount taken into account relates to the base actually certified and set by the authority, not the quote total: treat no line as secured before the certificate. And if the credit exceeds the tax due for the year, the unused excess is not lost: it can, in principle, be carried forward to later years, under the terms of article 152bis L.I.R. That is a point to watch closely for a company that is not yet very profitable.

Who this scheme helps least

Frankness beats mis-calibrated enthusiasm. A company that makes little or no taxable profit gains no immediate benefit from the credit, since there is no tax to reduce; the carry-forward softens but does not remove that mismatch. A structure whose investment consists only of excluded items (certain vehicles, a building) will not find it worthwhile either. And a project too vague to be certified stays on the global part. In all these cases, the question is not "how much does the credit earn me", but "how do I structure the investment so it qualifies". That is a matter of anticipation, to be handled before signing.

Frequently asked questions

What is the investment tax credit rate in Luxembourg?

Since tax year 2024, the global investment credit is 12% of the value of eligible investments, raised to 14% for assets qualifying for the special depreciation of article 32bis L.I.R. A separate part, for digital transformation and the ecological and energy transition, reaches 18% of eligible investments and expenditure.

Is the tax credit the same as a grant?

No. A grant such as SME Packages - Digital reimburses part of eligible costs in cash. The tax credit directly reduces the corporate income tax the company owes. The two schemes are different, and how they interact is checked case by case.

Can an Odoo project qualify for the 18% credit?

It can, where it forms part of a certified digital transformation project: software licence, integration and consulting, training and assigned staff are among the expenditure targeted. Eligibility is not automatic and depends on the certificate issued after review of the file.

What is the procedure for the digital transformation part?

The eligibility certificate application is filed via MyGuichet.lu; the Ministry of the Economy reviews the file and issues the certificate. The application must be made within two months of the close of the financial year, and the credit is then entered in the tax return.

What happens if the credit exceeds the tax due?

The excess not offset in the year is not lost: it can, in principle, be carried forward to later years, under the terms of article 152bis L.I.R. A company with little profit therefore has an interest in documenting its investment precisely.

Read more

• Luxembourg digitalisation grants: getting 70% of your Odoo project funded
• Odoo pricing in 2026: licences, implementation and the real cost
• Corporate tax in Luxembourg: CIT, municipal business tax and net wealth tax
• Odoo in Luxembourg: is it the right ERP for your SME?
• Accounting firm in Luxembourg: the complete guide for an SME

Why Advena?

We are both an Odoo integrator and an accounting firm, under one roof. In practice, your project quote is clear and priced line by line, exactly the document a certificate file requires, and it is the same team that then keeps your books, documents the base of the credit and enters it in your return. We keep the books of Luxembourg SMEs with 1 to 50 employees on a flat fee, from 325 € per month, all in. We inform and point you in the right direction; for a complex tax structure or a multi-jurisdiction holding, we will tell you plainly that it is not our ground.

Information up to date as at August 2026, based on article 152bis L.I.R. as amended by the law of 19 December 2023, per the Direct Tax Authority and the Guichet.lu page on the digital transformation credit. This article informs and does not constitute tax advice.