Tax relief for investment in a digital transformation project
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A business engaging in a digital transformation project may qualify for an investment tax relief. That tax relief is calculated on the amount(s) invested, and the operating costs incurred, in the context of a digital transformation project. The tax relief rate amounts to 18 % for the investments and operating expenses, apart from depreciable tangible investments. The rate applicable to the latter amounts to 6 %, in addition to the 12 % rate applicable to the tax relief for global investment. It follows that depreciable tangible investments likewise qualify for a rate of 18 %.
In order to claim such a tax relief, the business in question must submit, together with its income tax return, a certificate issued by the Minister of the Economy attesting to the fact of the investments and operating expenses having been actually made/incurred during the course of a given operating year (applicable for the first time for the 2024 operating year).
Who is concerned
This fiscal measure is intended for commercial, industrial, mining or craft businesses within the meaning of Article 14 L.I.R.
Prerequisites
The investments must be made, and the operating expenses incurred, in an establishment located in Luxembourg which is intended to remain there permanently. In addition, the investments must be physically implemented on the territory of the Grand Duchy of Luxembourg or on the territory of another State which is a party to the Agreement on the European Economic Area.
In that regard, the investments and operating expenses must be made/incurred on account of a project for the digital transformation of the production tool of the business or of the services provided by it. The duration of such a project may not exceed 3 consecutive operating years.
Digital transformation consists in 'the realisation of a process innovation or an organisational innovation by means of the implementation and use of digital technologies'.
The following terms have the following meanings:
- process innovation: 'implementation of a new or significantly improved production or delivery method, including significant changes in techniques, equipment or software. Excluded from this definition are minor changes or improvements, increases in production or service capabilities through the addition of manufacturing or logistical systems which are very similar to those already in use, ceasing to use a process, simple capital replacement or extension, changes resulting purely from changes in factor prices, customisation, localisation, regular, seasonal and other cyclical changes and trading of new or significantly improved products';
- organisational innovation: 'implementation of a new organisational method, workplace organisation or external relations of the business concerned. Excluded from this definition are changes that are based on organisational methods already in use in the business, changes in management strategy, mergers and acquisitions, ceasing to use a process, simple capital replacement or extension, changes resulting purely from changes in factor prices, customisation, localisation, regular, seasonal and other cyclical changes and trading of new or significantly improved products'.
Eligible costs
The tax relief covers only the following investments and operating expenses inherent in digital transformation or ecological and energy transition:
- investments in depreciable tangible assets other than buildings, agricultural livestock and mineral and fossil deposits;
- investments in software or in patents other than those acquired from a related company within the meaning of Article 56 L.I.R.;
- expenses incurred for the use of, or the right to use, patents or software other than those granted by a related company within the meaning of Article 56 L.I.R.;
- expenses in respect of consultancy services, diagnostic services and technical support services provided by external service providers which are not related to the normal operating expenses of the business, such as regular tax advice or legal advice, or advertising;
- expenses in respect of staff directly assigned to work on the digital transformation of the business;
- expenses in relation to training for staff directly assigned to work on the digital transformation of the business.
The following are, however, excluded:
- assets depreciable over a period of less than 3 years;
- motor vehicles;
- investments and operating expenses aimed at bringing the business into compliance with obligations arising from environmental protection legislation and legal and regulatory provisions applying to the setting-up and operation of industrial and commercial companies.
Objectives to be achieved
The investments made, and operating expenses incurred, in the context of a digital transformation project must satisfy one of the following objectives:
- reshape in its entirety a production process of the business, in such a way as to substantially improve the productivity of the business, its energy efficiency or its efficiency in terms of materials;
- implement an innovative economic model within the business, including as regards the circular economy, in such a way as to create new value for its stakeholders;
- significantly reshape the entire provision of services by the business, in such a way as to create new value for its stakeholders;
- significantly transform the way in which the business is organised, so as to create new value for its stakeholders;
- significantly reshape in their entirety the processes of the business, in order to substantially enhance identification and mitigation of the digital risks attaching to the activities of the business.
How to proceed
The income tax relief for investments made, and operating expenses incurred, in the context of a transformation project gives rise to a deduction of the amount of income tax payable for the tax year in the course of which the operating year during which the investments or operating expenses were made/incurred is closed. Should the level of tax be too low, the unused tax relief can be deducted from the tax payable in respect of the next 10 fiscal years.
The tax relief for investments is calculated on the purchase price or the cost price of the investments made over the course of the operating year in question. The tax relief for operating expenses is calculated on the deductible operating expenses for the operating year.
System for attestation of eligibility and certification
In order to claim a tax relief for a digital transformation project, the business in question must submit, together with its income tax return, a certificate attesting to the fact of the investments and operating expenses having been actually made/incurred during the course of a given operating year, as well as the amount thereof.
However, the grant of such a certificate is conditional on obtaining an 'attestation of eligibility' issued by the Ministry of the Economy.
Application for an 'attestation of eligibility'
The application for an attestation of eligibility is to be submitted to the Ministry of the Economy, using a specific form. The application can also be submitted via MyGuichet.lu or the MyGuichet.lu mobile app. This is a procedure requiring authentication.
Application processing time
The ministerial decision granting or refusing the attestation of eligibility is issued as quickly as possible, and in any event within 3 months from the date of receipt of a properly completed application.
Application for a 'certificate'
For each operating year in respect of which investments and/or operating expenses have been made/incurred, a certificate is issued by the Ministry of the Economy upon application by the business concerned. The application for the certificate is to be submitted to the Ministry of the Economy.
On risk of forfeiture, the application, accompanied by supporting documents, must be lodged by no later than 2 months after the close of the operating year during which the investments and/or operating expenses were made/incurred.
Following scrutiny of the application, the Ministry issues the certificate as quickly as possible and by no later than 9 months after the close of the operating year during which the investments and/or operating expenses were made/incurred.
Only investments and operating expenses which are made/incurred following submission of the application for the attestation of eligibility may form the subject-matter of the certificate.
Online services and forms
Who to contact
-
Ministry of the Economy Ministry of the Economy - tax relief certificates
- Address:
- 19-21, boulevard Royal L-2449 Luxembourg Luxembourg
- Phone:
- (+352) 2478-2478
- Fax:
- (+352) 46 04 48
- Email address:
- bonification@eco.etat.lu
- Website:
- https://meco.gouvernement.lu/fr.html
Related procedures and links
Procedures
Links
Further information
Legal references
-
Loi modifiée du 4 décembre 1967
concernant l'impôt sur le revenu
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Règlement grand-ducal du 27 août 2024
relatif au certificat à joindre à la déclaration d’impôt sur le revenu prévu à l’article 152bis, paragraphe 6, de la loi modifiée du 4 décembre 1967 concernant l’impôt sur le revenu
-
Règlement grand-ducal du 27 août 2024
modifiant le règlement grand-ducal du 29 octobre 1987 portant exécution de l’article 152bis, paragraphe 10 de la loi du 4 décembre 1967 concernant l’impôt sur le revenu
