On 14 December 2017, the Luxembourg Parliament approved the budget for 2018 and officially published it on 21 December 2017, with the tax measures applicable from 1 January 2018.
The corporate tax rate will fall from 19 percent to 18 percent. As a result, the effective combined income tax rate for a company in the city of Luxembourg in 2018 will be 26.01 percent. In addition to the corporate income tax rate reduction the budget law introduces two additional investment tax credits for companies—one for investments in purchased software, and the other for electric cars with zero emissions or hydrogen fuel cell cars.
For the purchase of new zero emission electric cars or for fuel cell cars registered after 31 December 2017, calculated on the purchase price (after deduction of any subsidies) up to EUR 50,000 per approved vehicle, an investment tax credit of 13 % will be granted.
The amount of the investment tax credit for the software purchase will be granted is calculated in two tranches: for the share of purchases up to € 150,000, the amount is 8 % of the cost and for the part over € 150,000 it will be 2 % of the cost. The tax benefit from the scheme may not exceed 10 % of the tax for the year of software acquisition.
