DIGITAL TRANSFORMATION PROJECT TAX CREDIT
Luxembourg now offers an 18% tax credit for qualifying digital transformation projects, covering both investment and operating expenses.
The regime is designed to support companies undertaking substantial digital modernisation - whether through new technologies, redesigned processes, strengthened cybersecurity, or broader changes to their business model.
What the regime offers
Projects benefit from an effective 18% credit on eligible costs. This applies per project, not at entity level.
18%
Directly on:
- Eligible operating expenses
- Eligible intangible assets (software, patents, licences)
18%
On tangible depreciable assets via:
- 6% digital-project credit, plus
- 12% global investment tax credit
Who can benefit?
The regime applies to Luxembourg-based enterprises subject to income tax. Although sector-neutral, it is particularly relevant for financial services firms undertaking digital transformation projects - including banks, asset managers, insurers, payments companies, and other financial institutions modernising their operating models, cybersecurity frameworks, data infrastructure, or digital service offerings.
What constitutes a qualifying project?
A qualifying project must aim to achieve at least one of the following:
- Redefine production processes to significantly improve productivity, energy or material efficiency
- Implement an innovative business model, including circular-economy concepts
- Significantly redefine the service offering to create new value
- Transform the organisation of the business through digital technologies
- Strengthen cybersecurity or digital-risk management across the entire organisation
The project must go beyond “basic digitisation” and represent a holistic transformation using digital technologies.
Project duration: up to 3 consecutive financial years, with only costs incurred after filing the eligibility request being considered.
Eligible costs
- Depreciable tangible assets (servers, IT hardware, equipment)
- Software & patents (acquisition or development)
- Software/patent licences (e.g. SaaS, cloud computing)
- Must be used in Luxembourg
- Cannot be granted by a related enterprise
- Advisory, diagnostic & technical support services
- Training costs for staff involved in the project
- Internal project staff costs based on timesheets
- Other project-level expenses such as cyber audits, certification costs, cloud/SaaS fees, project management
All amounts must be net of other state aids.
Exclusions
- Assets depreciable over less than 3 years
- Motor vehicles
- Costs aimed solely at achieving legal or regulatory compliance
- Environmental building renovation
- Licences from related parties or not used in Luxembourg
- Routine legal/tax advice or generic marketing
Administrative process
1. Eligibility Attestation
- File request with the Ministry of the Economy via MyGuichet.lu
- Only expenses incurred after this filing date qualify
2. Certificate
- Confirms eligible costs for the financial year
- Must be requested within 2 months after the end of the financial year
- Ministry has up to 9 months to issue the certificate
3. Claiming the Credit
- Attach certificate to the income tax return
- The credit offsets income tax due for that year
- Unused credit can be carried forward 10 tax years
WHY IT MATTERS
- Significant cost reduction for multi-year digital initiatives
- Supports cybersecurity upgrades, cloud migration, digital operating models, and AI-related transformation
- Strong alignment with Luxembourg’s policy objectives on innovation, digital resilience, and business modernisation