A new provision, Article 154 quaterdecies of the Luxembourg Income Tax Law, introduces a tax credit for investments in start-up companies.

Who can benefit?

• Resident individuals
• Non-resident individuals

Eligible investments

The tax credit applies to investments meeting the following conditions:

• Acquisition of shares in a start-up company, either at the time of incorporation or as part of a capital increase;
• The shares must be held directly by the investor and fully paid in cash before the end of the tax year in which the investment is made;
• The investment must be made in a fully taxable entity that is resident in, or established within, the European Economic Area (EEA), subject to a comparable tax and having a domestic permanent establishment.

What qualifies as a start-up?

For the purposes of this tax credit, a start-up is an entity that:

• Is a capital company or a cooperative;
• Has been incorporated for less than five years;
• Employs fewer than 50 employees;
• Has a balance sheet total or annual turnover below EUR 10 million;
• Carries out an innovative activity. In certain cases, the innovative nature of the activity is assessed by comparing research and development expenses with operating costs.

This overview is intended to highlight the existence of this new tax incentive. A more detailed analysis will be required to assess eligibility on a case-by-case basis.
Should you wish to explore whether this measure could apply to your situation, please do not hesitate to contact us.