A corporate tax cut, uncapped loss carryforward, the investment tax credit raised to 21 % and a higher minimum wage: the 2027 draft budget measures that reach an SME. Text still in debate.

In short. Luxembourg's draft state budget for 2027, presented on 7 October 2026, cuts corporate income tax by one point, raises the investment tax credit for digital and ecological projects from 18 % to 21 %, removes the 17-year limit on carrying losses forward, and pairs the minimum wage rise with a stronger tax credit. VAT does not change. The text is tabled at the Chamber of Deputies, not yet voted.

Every autumn, the state budget sets the tax backdrop for the year ahead. The 2027 one, tabled on 7 October 2026, carries several measures that reach a Luxembourg SME directly, starting with a fresh cut to corporate tax. Here is what changes, what is still in debate, and what is worth anticipating now, without waiting for the vote.

A budget still in debate

First point, because it governs the rest: this is a draft. The Finance Minister presented the budget on 7 October 2026, and the text is now going through the Chamber of Deputies, where it can still be amended before the year-end vote. The measures described here are the announced direction, not yet the law in force. For most of them, the target effective date is tax year 2027. We present them as tabled, and will update this article as the text is adopted.

The cut to corporate income tax

This is the headline measure for businesses. The standard rate of corporate income tax (IRC), the one that applies to the highest profits, falls from 16 % to 15 %. The reduced rate on smaller profits also falls by one point, and the bracket thresholds are raised, with the top band pushed towards 250,000 € of taxable income.

Adding the IRC, the employment-fund surcharge and the municipal business tax, the overall rate on the profits of a company based in Luxembourg City would come down from about 23.87 % to close to 22.8 %. The real saving depends on your taxable profit, though, not on the headline rate alone: between depreciation, provisions and loss carryforward, two companies with the same turnover can pay very different tax. We set out that mechanism, and the three taxes a company bears, in our article on corporate tax in Luxembourg.

Loss carryforward, finally without a time limit

Here is a less-discussed measure, but a heavy one for young or cyclical companies. Today, a tax loss can only be carried forward for 17 years. The draft removes that time limit, for IRC as well as municipal business tax, and the change would also cover losses arising after 31 December 2016.

In practice, a start-up piling up losses in its early years will be able to set them against future profits without fear of them expiring before they are used. Same logic for a company going through a trough: a bad year's loss stays usable when results recover. It is a breath of air for the tax cash flow of companies that invest early and cash in late.

Want to know what the tax cut and the removal of the loss limit change for your company? We size it up on your file.

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The investment tax credit raised to 21 %

The budget strengthens the tax credit that rewards productive investment. The strand dedicated to digital transformation and the ecological and energy transition rises from 18 % to 21 % of eligible spending, and the share applying to tangible assets in that strand goes from 6 % to 9 %. This credit is not paid in cash: it comes straight off the IRC the company owes.

For an SME digitising its operations, the point is very concrete. A well-structured ERP project, licence, implementation, consulting, training and internal time included, gathers exactly the lines this strand targets, and the rise to 21 % increases the tax saved accordingly. Eligibility is never automatic, it goes through a certificate; we explain the process, the rates and the pitfalls in our article on the investment tax credit in Luxembourg.

Payroll: the minimum wage rises, and so does the tax credit

In the same package, the social minimum wage goes up by 3.8 % on 1 January 2027, and the minimum wage tax credit (CISSM) is sharply raised, from 81 € to 179 € a month, then to 200 € on 1 July. For an employer, the two measures do not have the same effect: the higher floor adds to the wage cost, while the tax credit lifts the worker's net pay at the State's expense. We set out the amounts, the real cost and this distinction in our dedicated article on the 2027 minimum wage rise.

The other measures to know

The budget carries a set of more targeted provisions, several of which can reach an SME depending on its activity.

  • The tax credit for hiring unemployed people is extended to the end of 2029, a useful support for those recruiting.
  • Accelerated depreciation for new rental housing rises from 4 % to 6 %, within certain limits, a measure aimed at property investment.
  • The holding period that reclassifies a gain as speculative goes from 6 to 12 months for movable assets.
  • Reporting simplifications ease some employer obligations, notably lists sent to the tax administration.
  • A reform creating a single tax class is announced for later implementation, around tax year 2028.

On indirect taxation, VAT does not change: the rates of 17, 14, 8 and 3 % stay in place. The national CO2 tax and some excise duties do rise in 2027, which will weigh mainly on fuel and energy.

What it changes in practice for your SME

In the short term, the point is not to change anything, but to revisit your assumptions. Lower corporate tax and loss carryforward without a limit change the amount you need to provision for the current year and shift your forecasts. It is also the right moment to check your tax advances: if they were set on a rate that is about to fall, letting them run ties up cash you will recover later.

Let us be clear about the limit of the exercise. Until the budget is voted, none of these measures is final, and it would be unwise to commit to a heavy decision on the strength of a draft alone. The sensible stance is twofold: build the direction into your forecasts, without rushing an irreversible move before the vote. An investment project aiming at the 21 % credit, for instance, is prepared now, but its eligibility file will rest on the adopted text. We inform here on a draft law; we do not give definitive tax advice on your situation.

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Frequently asked questions

When does the 2027 budget take effect in Luxembourg?

The draft budget was presented on 7 October 2026 and has to be voted by the Chamber of Deputies before the year-end. Most of the tax measures target tax year 2027. Until the text is adopted, they remain open to amendment.

How much does corporate tax fall in 2027?

The standard rate of corporate income tax falls from 16 % to 15 %, and the reduced rate also falls by one point. Adding the employment-fund surcharge and the municipal business tax, the overall rate in Luxembourg City would come down from about 23.87 % to close to 22.8 %.

What changes for tax loss carryforward?

The draft removes the 17-year limit on carrying losses forward, for IRC as well as municipal business tax, including for losses arising after 31 December 2016. Losses could then be set against future profits without expiring.

Is the investment tax credit going up?

Yes. The strand dedicated to digital transformation and the ecological transition rises from 18 % to 21 % of eligible spending, and the share for tangible assets in that strand goes from 6 % to 9 %. The credit comes straight off the IRC the company owes.

Does VAT change in 2027?

No. The VAT rates of 17, 14, 8 and 3 % stay unchanged in the 2027 draft budget. The CO2 tax and some excise duties do rise, which mainly affects fuel and energy.

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Why Advena?

We keep the books of Luxembourg SMEs in the Odoo we deploy ourselves, on a flat fee, from 325 € per month, all in. When a budget moves the rates, the value of real time is plain: your forecast tax recalculates as you go, your advances can be checked in minutes, and an investment project is prepared with books that already document the basis for the credit. Our model is built for the SME of 1 to 50 employees; for a complex holding or a multi-jurisdiction structure, we will tell you plainly that it is not our ground. We inform and point the way; we do not replace tailored tax advice.

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Information current as of 11 November 2026, based on the draft state budget for 2027 presented on 7 October 2026 (government communiqué) and tabled at the Chamber of Deputies. As the text is still in debate, the measures are given subject to the vote and may change. This article informs and does not constitute tailored tax advice.