Luxembourg’s 2027 Budget Bill Proposes Corporate Tax Cuts and Changes to Capital Gains and Loss Carryforwards

Background

On 7 October 2026, the Luxembourg government filed Bill No. 8800 (the “Bill”), its proposed budget law for 2027. Among its amendments to the Luxembourg income tax law of 4 December 1967 (LITL), the Bill would reduce corporate income tax rates, extend the holding period used to identify speculative gains on movable assets, and remove the 17-year limit on carrying forward tax losses. The measures remain proposals.

Corporate Income Tax Rate (Article 174 LITL)

The Bill would lower each principal corporate income tax rate by 1%. For taxable income up to 200,000 euros, the rate would be 13%, down from 14%. For taxable income exceeding 250,000 euros, it would be 15%, down from 16%. For taxable income between 200,000 and 250,000 euros, a transitional formula would apply: 26,000 euros plus 23% of the amount exceeding 200,000 euros. The proposal therefore changes both the rates and the income thresholds at which they apply. As a result, the maximum aggregate corporate tax burden in Luxembourg City (including corporate income tax, municipal business tax, and the contribution to the employment fund) would decrease from 23.87% to 22.80%, further enhancing Luxembourg’s competitiveness as a location for businesses and investment structures.

Speculative Gains: Holding Period Extended to 12 Months (Articles 99bis and 100 LITL)

For movable assets, including shares held as private assets, the Bill would extend the period during which a disposal can give rise to a speculative gain from six months to twelve months after acquisition. A gain on a disposal within that period could therefore be taxable under the speculative gains rules even when the asset has been held for more than six months. The Bill makes corresponding changes to the specific carried interest rule in Article 99bis LITL and to the holding period in Article 100 LITL governing disposals of significant shareholdings. The Bill’s commentary states that the taxation rules and methods under Article 100 LITL would otherwise remain unchanged. Similarly, Article 156(8)(a) LITL, applicable to certain gains realised by nonresidents, would be amended to align with the proposed extension of the holding period from six to twelve months. Although the measure may marginally reduce Luxembourg’s attractiveness for short-term investments, it is intended to encourage longer-term investment behaviour by increasing the minimum holding period required for assets to fall outside the speculative gains regime.

Tax Loss Carryforwards: 17-Year Limit Removed (Article 114 LITL)

The Bill would abolish the 17-year carryforward limit for qualifying tax losses. In particular, losses arising in financial years ending after 31 December 2016 would no longer expire solely because that period has elapsed. The other conditions for deducting carryforward losses would continue to apply. A parallel amendment would remove the 17-year limit for municipal business tax purposes.

Effective Date and Practical Considerations

If enacted as filed, these three measures would take effect from tax year 2027. Companies should revisit tax forecasts using the proposed rates and review their schedules of carryforward losses. Individuals planning disposals of privately held shares or other movable assets should check the acquisition date against the proposed 12-month period, particularly if a sale is expected in 2027.

Conclusion

The proposed corporate tax rate reduction and removal of the 17-year loss carryforward limit reflect Luxembourg’s efforts to strengthen its tax competitiveness. They sit alongside proposed reforms for individuals, including the new tax regime for employee stock options granted by young innovative companies discussed in our earlier alert. The Bill remains subject to parliamentary review, and its provisions may change before enactment.