Corporate tax in Luxembourg: CIT, municipal business tax and net wealth tax

In short. A Luxembourg capital company (Sàrl, SA, Sàrl-S) is taxed on its profits through corporate income tax (CIT) and municipal business tax (MBT), and on its net assets through net wealth tax (NWT). As of July 2026, CIT is 15% up to 175,000 € of taxable income and 16% above 200,000 €, increased by a 7% employment-fund surcharge. Adding MBT, the combined rate in Luxembourg City sits around 23.87%. The headline rate is not what you actually pay, though: everything is decided in how taxable profit is calculated.

"How much tax will my company pay?" is one of a director's first questions, and one of the worst-served online: rates linger from one year to the next, MBT gets forgotten, and net wealth tax drops off entirely. Here are the three taxes that weigh on a Luxembourg company, the real rate once everything is added up, and where the final figure is genuinely decided.

Which taxes does a company pay in Luxembourg?

A capital company bears three separate levies, each with its own logic. Blurring them leads you to underestimate the real burden.

The first two hit what the company earns, the third what it owns. A company with little profit pays little CIT and MBT, but still owes a minimum net wealth tax. That is a point many founders discover late.

Corporate income tax (CIT)

CIT is the tax on profits levied by the State. Since tax year 2025, its scale is as follows (as of July 2026): 15% where taxable income does not exceed 175,000 €, a progressive smoothing band between 175,000 € and 200,000 €, then 16% above 200,000 € (source: Guichet.lu). The top rate was 17% before the reform; it was cut by one point.

On top of CIT sits the employment-fund surcharge, equal to 7% of CIT. For a company with profit above 200,000 €, the effective CIT is therefore not 16% but 16% + 7% = 17.12%. This surcharge is automatic and often left out of quick estimates.

Municipal business tax (MBT)

MBT is levied by the municipality where the company operates. It is calculated in two steps: a base rate of 3% on operating profit, multiplied by a municipal multiplier specific to each commune, which ranges from 200% to 400% depending on the location (source: Administration des contributions directes).

In Luxembourg City, the multiplier is 225%, giving an MBT of 3% × 225% = 6.75%. The same company will therefore pay a different MBT depending on whether it is based in the capital or in a commune with a higher multiplier. It is a real, if rarely decisive, factor in choosing where to set up.

What is the overall tax rate for a Luxembourg company?

The overall rate on the profits of a company based in Luxembourg City comes to roughly 23.87%, adding CIT (16%), the employment-fund surcharge (7% of CIT) and municipal business tax (6.75%). That combined rate places Luxembourg in the lower European range for profits above 200,000 € (source: Administration des contributions directes).

Take an example. A Sàrl based in Luxembourg City makes 300,000 € of taxable profit. CIT comes to 48,000 € (16%), the employment-fund surcharge to 3,360 € (7% of CIT), and MBT to 20,250 € (6.75%). The total burden approaches 71,600 €, close to 23.9%. The figure is clean, but it rests on a strong assumption: that the 300,000 € of taxable profit is correct. That is exactly where the real bill is decided.

Net wealth tax (NWT), even when you earn nothing

Net wealth tax hits the company's net assets, regardless of its result. The rate is 0.5% on net wealth up to 500 million euros, and 0.05% above (as of July 2026).

The surprising part: even a company with no profit, or at a loss, remains subject to a minimum net wealth tax, set according to the composition and total of its balance sheet. This minimum ranges roughly from 535 € to 32,100 € a year (source: Guichet.lu). A holding company whose assets are mostly financial often falls into the higher bands. A young trading company usually pays the floor minimum. Either way, budget for it from year one.

Capital company or sole proprietorship: not the same tax

Everything above concerns capital companies: the Sàrl, the Sàrl-S, the SA. They have their own tax personality and fall under CIT. A sole proprietorship or a partnership, by contrast, is not taxed as such: its profit flows straight into the operator's personal income tax return, subject to the progressive personal income tax scale, which climbs well above 24%.

The consequence is concrete at incorporation. Below a certain level of profit, the sole proprietorship is often lighter. Above it, the capital company, with its capped CIT rate, becomes more attractive for tax, quite apart from the protection of personal assets. It is not a call to make by guesswork, and it is prepared from the choice of legal form onwards, as we cover in our guide to setting up a Sàrl in Luxembourg.

The headline rate is not the real rate

Here is the point the rate tables leave out: you are not taxed on turnover, nor even on accounting profit, but on your taxable profit. Between the two sit depreciation, justified provisions, losses carried forward from prior years, the (sometimes partial) deductibility of certain expenses, and special regimes. A company that is profitable in accounting terms can show a much lower taxable result, entirely lawfully.

This is also where the costly mistakes hide. A non-deductible expense claimed as a deduction, a poorly documented provision, a forgotten loss carry-forward: each is paid for on audit or in tax overpaid. The final figure therefore depends not only on the rate, but on the quality of the bookkeeping that builds the base. Books kept current all year, rather than reconstructed in June, let you anticipate the tax and provision the right amount instead of discovering it at closing. That is exactly what real-time accounting changes.

A word of caution to close: company taxation changes every year, and every situation has its specifics. The rates above are those in force as of July 2026, but your exact burden is calculated on your own file. We inform here, we do not replace an analysis of your case.

Frequently asked questions

What is the corporate tax rate in Luxembourg in 2026?

For profit above 200,000 €, the overall rate in Luxembourg City is around 23.87%: CIT at 16%, increased by 7% for the employment fund, plus municipal business tax of 6.75%. Below 175,000 € of taxable income, CIT drops to 15%.

What is the difference between CIT and MBT?

CIT is the tax on profits levied by the State. MBT is levied by the municipality, at a 3% base rate multiplied by a municipal multiplier (225% in Luxembourg City, i.e. 6.75%). Both hit profit, but one is national and the other local.

Does a company with no profit pay tax?

Yes. Even with no profit, a company remains subject to the minimum net wealth tax, set according to its balance sheet, roughly 535 € to 32,100 € a year. CIT and MBT are only due when there is taxable profit.

When is a company's tax return due?

The return for CIT, MBT and net wealth tax is in principle due by 31 December of the year following the financial year, filed electronically. Quarterly tax advances are also called during the year, based on the latest known results.

Is the Luxembourg rate really attractive?

The combined rate of around 23.87% places Luxembourg in the lower range of the European Union. But the headline rate matters less than the base: the real burden depends on depreciation, provisions and loss carry-forwards, that is, on how taxable profit is built.

Read more

• What an accounting firm costs in Luxembourg: flat fee, hourly rates and hidden extras
• Filing annual accounts in Luxembourg: deadlines and late fees
• Luxembourg VAT returns in Odoo
• Setting up a Sàrl in Luxembourg: steps, capital and procedures
• Odoo in Luxembourg: is it the right ERP for your SME?

Why Advena?

• Tax is planned, not endured: books kept current all year let you anticipate CIT, MBT and net wealth tax, and provision the right amount.
• Finance and digital under one roof: the taxable base is built in the tool we deployed, not reconstructed at closing.
• A clear flat fee, from 325 € per month: bookkeeping, VAT, annual accounts and returns included, with no hourly billing.
• We inform, we do not invent: your exact tax burden is calculated on your file, not on a generic scale.