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Start-up tax credit in Luxembourg: up to 100,000€ in tax savings from 2026
Investing in a Luxembourg start-up could save you 20% in tax credits. Eligibility, limits and how to claim from the 2026 tax year.
Great news for private investors in Luxembourg: since 1 January 2026, a brand-new tax credit lets you get back 20% of your investment in innovative start-ups. The government's goal? Supercharge Luxembourg's entrepreneurial ecosystem by getting individuals to fund young businesses.
Here's everything you need to know: who qualifies, what the conditions are, and how much you can actually save.
The basics
You invest in an eligible start-up, and Luxembourg gives you a tax credit worth 20% of your investment. This credit reduces your income tax bill directly, not just your taxable income.
Key figures:
- Maximum tax credit: 100,000€ per year, per taxpayer
- Minimum investment: 10,000€ per start-up, per year
- Credit rate: 20% of the amount invested
- Minimum holding period: 3 years
Tax credit vs tax deduction
A tax credit is more powerful than a deduction. It reduces your tax bill directly, euro for euro. For example, a 30,000€ investment in an eligible start-up gives you a 6,000€ tax credit.
Who can benefit?
The tax credit is available to individuals who meet one of these conditions:
- You are a tax resident in Luxembourg.
- You are an assimilated non-resident (taxed in Luxembourg under Article 157ter LIR) for the year of the investment.
However, you cannot claim the credit if you are:
- A founder of the start-up
- An employee or in a subordinate relationship with the company
The logic is straightforward: this scheme targets external investors, the "business angels" who bring in fresh capital.
Which start-ups qualify?
Not every young company is eligible. The start-up must tick several specific boxes:
Size and age criteria
- Established for less than 5 years at the end of the relevant tax year
- Fewer than 50 employees
- Turnover or balance sheet total below 10 million euros
- Registered in Luxembourg (or in the EEA with a permanent establishment in Luxembourg)
Innovation criteria
- At least 2 full-time equivalents working for the entity (employees or independent directors)
- R&D spending of at least 15% of total operating costs in at least one of the three preceding financial years (certified by an approved auditor)
Excluded sectors
Certain activities are explicitly excluded: law firms, audit firms, accountants, real estate companies, SICARs, listed entities, and companies formed through mergers or demergers. Companies that have distributed dividends or reduced their capital (except to offset losses) are also excluded.
How does the investment work?
To qualify for the tax credit, your investment must follow strict rules:
- It must involve the acquisition of new, fully paid-up, registered shares, either at incorporation or during a capital increase.
- Only amounts invested in share capital and share premium count.
- You must hold the shares directly (or through a fiscally transparent entity, proportionally).
- Your stake cannot exceed 30% of the start-up's capital.
- Total eligible investments per start-up are capped at 1.5 million euros.
The shares must be held without interruption for at least 3 years from the end of the tax year in which the credit is claimed. For example, for an investment made in 2026, you must keep your shares until at least 31 December 2029.
What happens if you sell before 3 years?
You lose the tax credit. The tax authorities will issue a corrective tax assessment to claw back the benefit. Exception: no adjustment is made in cases of bankruptcy of the start-up, or the death or permanent incapacity of the investor.
What if the credit exceeds your tax bill?
The start-up tax credit is non-refundable. If the credit is larger than your tax liability for the year, the surplus is not paid out in cash. However, it can be carried forward to future years and offset against your future tax bills.
Documents you'll need
When filing your tax return, you'll need to provide:
At the time of investment (within 2 months of releasing the funds): a certificate from the start-up confirming the shares have been fully paid up, the minimum and maximum thresholds are met, the 30% cap is respected, and there is no employment or subordinate relationship with the investor.
After the end of the tax year: a second certificate from the start-up confirming it meets all eligibility criteria (age, size, innovative character, certified R&D expenses).
In subsequent years: a statement in your annual tax return confirming you still hold the shares (compliance with the 3-year period).
A concrete example
Sophie, a Luxembourg resident, invests 50,000€ in a healthtech start-up based in Luxembourg City. The company is 3 years old, has 12 employees, and spends 20% of its operating costs on R&D.
- Tax credit: 50,000 × 20% = 10,000€
- Sophie holds her shares for 3 years
- On her 2026 tax return, she deducts 10,000€ directly from her tax bill
If Sophie had invested 500,000€ (theoretical credit of 100,000€) but only owed 70,000€ in tax that year, the remaining 30,000€ would carry forward to 2027.
A step in the right direction
This tax credit draws inspiration from similar schemes already in place in France, Belgium and the UK. Finance Minister Gilles Roth estimated the fiscal cost at between 2.5 and 7.5 million euros, a modest investment given the objective: attracting more private capital to young innovative companies and reducing their reliance on bank financing.
As ecosystem stakeholders point out, this measure fills a long-standing gap. It complements existing public funding and institutional investors by adding a "third pillar" of financing through private investors.
Investing in a start-up in 2026?
Don't forget to gather all your certificates for your next tax return. On taxx.lu, you can easily file your return and optimise your tax situation. Start your tax return now.
