On 7 October 2026, the Luxembourg Minister of Finance presented the draft budget law for 2027 (bill n°8800, the “Draft Budget Law”) to the Parliament. This legislative proposal sets out the government’s fiscal policy for the upcoming year, introducing a series of tax and social measures designed to support economic competitiveness, enhance tax fairness, and align with European Union directives such as the Anti-Tax Avoidance Directive (ATAD) and the OECD Pillar Two framework. The draft law covers amendments to corporate income tax, net wealth tax, value-added tax, and social security contributions, alongside targeted incentives for research and development, sustainable investment, and workforce upskilling. The bill now enters the parliamentary debate phase, with adoption expected before year-end 2026 and most measures taking effect from 1 January 2027. Stakeholders should monitor the legislative process closely, as amendments may be introduced during committee discussions.
Key Takeaways
- Corporate Tax Reforms: The draft proposes adjustments to the corporate income tax rate schedule and introduces a new patent box regime aligned with OECD nexus approach, offering an 80% exemption on qualifying IP income. It also tightens interest deduction limitation rules to comply with ATAD 2, impacting highly leveraged structures.
- Social Security and Payroll Measures: Contribution ceilings for pension and health insurance will be indexed to wage growth, while a new “future skills” levy of 0.15% on gross salaries will fund lifelong learning programs. Employers benefit from expanded tax credits for hiring long-term unemployed and apprentices.
- VAT and Indirect Tax Updates: The bill extends the reduced VAT rate of 3% to district heating from renewable sources and introduces a mandatory e-invoicing framework for B2G transactions effective 1 July 2027, with B2B rollout planned for 2028. These changes aim to reduce the VAT gap and modernize tax administration.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement