Luxembourg Introduces a New Start-Up Tax Credit Effective from 2026

Luxembourg has launched a new Start-Up Tax Credit, effective from the 2026 tax year, designed to encourage individual investment in young, innovative start-ups. The credit is open to Luxembourg tax-resident individuals and certain qualifying non-residents who invest directly in the share capital of an eligible start-up and retain their investment for a minimum of three consecutive years but excludes Start-up founders and employees from from the benefit.

Start-up eligibility conditions to fall within the regime are:

• employ fewer than 50 people;
• have total assets or annual turnover not exceeding EUR 10 million;
• have been incorporated for less than five years, assessed at group level;
• operate outside excluded sectors, such as audit firms and regulated accounting professions;
• not qualify as a company in difficulty under applicable EU rules.

Investment requirements to qualify must:

• be made directly into the start-up’s share capital, either at incorporation or through a capital increase;
• reach a minimum amount of EUR 10,000;
• not give the investor more than 30% ownership of the start-up’s share capital;
• remain within an overall eligible investment cap of EUR 1.5 million per start-up.

The amount of the tax credit for the Start-Up Tax Credit must correspond to 20% of the eligible investment, subject to a maximum of EUR 100,000 per investor per year.

Although subject to many conditions, the regime marks an important step in reinforcing Luxembourg’s start-up ecosystem and aligns with broader governmental initiatives to promote innovation, competitiveness, and future employee incentive arrangements.