Luxembourg Launches New Start-Up Tax Credit

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On 17 December 2025, the Luxembourg Parliament approved Bill No. 8526 introducing a new tax credit for individuals investing in start-ups. The measure applies from the 2026 tax year and is designed to enhance Luxembourg’s attractiveness as a hub for innovation and entrepreneurship.

The new regime aims to mobilise private capital, strengthen start-ups’ equity base and reduce reliance on bank financing, while aligning with EU state aid rules and broader innovation policy objectives.

Definition of eligible start-up entities

The tax credit applies to investments in qualifying start-up entities established for less than five years, employing fewer than 50 people and with annual turnover or balance sheet totals not exceeding EUR 10 million. Eligible entities must be fully taxable in Luxembourg or in the European Economic Area and operate through a Luxembourg permanent establishment.

To qualify, start-ups must demonstrate innovative activity, including at least two full-time equivalent staff or directors and research and development expenditure representing at least 15% of operating costs. These criteria must be certified by an approved auditor or chartered accountant.

Excluded activities and safeguards

Certain sectors are excluded from the regime, including law firms, audit and accounting firms, real estate-focused businesses, venture capital investment companies, listed entities and companies formed through mergers or demergers. Entities that have distributed dividends, reduced capital or are classified as “enterprises in difficulty” under EU rules are also excluded.

Eligible investors and investment conditions

The tax credit is available only to individual taxpayers who are Luxembourg residents or assimilated non-residents. Founders and employees of the start-up are not eligible. Investments must be made through the acquisition of newly issued, fully paid-up registered shares or units and held for at least three uninterrupted years.

The minimum eligible investment is EUR 10,000 per start-up per tax year. Ownership is capped at 30% per investor, with a total investment cap of EUR 1.5 million per start-up entity.

Tax credit mechanics

The tax credit amounts to 20% of the eligible investment. The maximum credit per taxpayer is EUR 100,000 per year. Any excess over the annual income tax liability is non-refundable but may be carried forward to offset future tax liabilities, subject to the same conditions.

According to International Investment experts, Luxembourg’s new start-up tax credit significantly strengthens the country’s position in the European innovation landscape. By combining strict eligibility rules with a meaningful tax incentive, the regime encourages long-term private investment while safeguarding against abuse, making Luxembourg increasingly attractive for both entrepreneurs and private investors.