Investment Tax Credit Luxembourg: Tax Incentives for Digital Transformation

Luxembourg is strengthening its position as a leading European innovation hub with the introduction of the Investment Tax Credit (ITC), sending a strong signal about the future viability of its business landscape.

Since January 2024, companies can benefit from up to 18% in tax credits on investments that support digital and green transformation. The ITC offers especially attractive incentives for IT-related projects – such as infrastructure modernization, software and platform investments, or consulting and project-related staffing costs. Eligibility requires formal approval by Luxembourg’s Ministry of the Economy, which confirms the project’s alignment with transformation objectives.

What types of expenses are eligible?

The ITC covers both capital expenditures (CAPEX) and operational expenditures (OPEX) over a period of up to three years, including:

• Hardware investments (e.g. servers, edge devices, energy systems)
• Software licenses, SaaS solutions, and custom-developed applications
• Consulting, architecture, and implementation services directly tied to the project
• Project-specific personnel and training costs that contribute to execution

The funding period may span up to three consecutive fiscal years. Unused credits can be carried forward for up to ten years – a major benefit for companies with long-term IT roadmaps. Eligible are projects that demonstrably contribute to digital transformation, such as implementing modern system architectures, increasing operational efficiency, or deploying automation solutions. The ITC targets core investment areas of modern IT landscapes – including cloud migration, API integration, data and workflow platforms, automation, and security-by-design.

Regulatory Framework: How the Tax Credit Works

The Investment Tax Credit is managed by Luxembourg’s Ministry of the Economy and supervised jointly with the Ministries of Finance and Environment, Climate and Sustainable Development. The application process is multi-stage and project-specific:

1. Companies first apply for an eligibility certificate (attestation d’éligibilité) from the Ministry of the Economy, confirming the project’s contribution to digital or green transformation.
2. The tax credit is then claimed annually as part of the company’s tax return and applied by the tax authority.
3. The credit can be applied across up to three fiscal years, with unused amounts eligible for carryforward for ten years.

Non-eligible projects include those with purely regulatory intent, system updates without architectural or functional improvements, and investments in vehicles or real estate. The decisive factor is the project’s technical contribution to transformation – for example, through modernized platform architectures, the introduction of new security frameworks, or migration to cloud-native environments.

Qualified Transformation Areas

To be eligible, a project must make a demonstrable contribution to either digital or environmental transformation and measurably improve technological or operational structures.

Digital Transformation:

• Modernizing IT and production processes to boost efficiency and automation
• Developing digital business models or platform strategies (e.g. API-driven or modular architectures)
• Optimizing digital services and user experiences to create added value for customers and partners
• Enhancing cybersecurity, identity management, and technical resilience
• Deploying digital tools to transform organizational processes (e.g. through data analytics, cloud integration, workflow automation)

Ecological and Energy Transformation:

• Increasing energy efficiency in data centers, platforms, or IT infrastructure
• Reducing CO₂ emissions via workload consolidation and virtualization
• Migrating to energy-efficient hardware or cloud environments with a proven sustainability strategy
• Extending the lifecycle of IT systems through modernization or reuse strategies
• Using, generating, or storing renewable energy in IT operations

Not eligible:

• Projects focused exclusively on compliance or regulatory implementation
• Minor system or software updates without structural improvements
• Investments in company vehicles, real estate, or non-transformative replacements

How CONVOTIS Supports Companies

Our experts help you align your transformation initiatives with the ITC framework:

• Evaluation of eligibility based on business and technological objectives
• Structuring of documentation, evidence, and timelines
• Technical and strategic project design – from architecture to execution
• Seamless integration of compliance and governance into your IT and planning processes

The Investment Tax Credit is a powerful tool for accelerating digital transformation while optimizing costs. Whether you are modernizing IT infrastructure or advancing ESG goals – CONVOTIS ensures that your projects are both future-ready and financially efficient.