Official Publication of ICC 2026 Rates
The Direct Tax Administration (ACD) has made available the official file listing all ICC multiplier rates applicable for the 2026 tax year, municipality by municipality. This document, accessible on the Luxembourg direct tax portal, constitutes the legal reference for calculating the municipal business tax owed by capital companies and other taxable entities established in the Grand Duchy.
Official link: ICC Rates 2016-2026
These multiplier rates, set annually by each Luxembourg municipality, determine the final ICC amount by applying a coefficient to the tax base calculated according to national tax rules. The differences between municipalities can be significant and represent a major differentiating factor in choosing where to establish an economic activity in Luxembourg.
The ICC, a Structural Component of Luxembourg Corporate Tax
A common misconception is to consider the ICC as a separate local tax, even secondary, compared to corporate income tax (IRC). This perception is technically incorrect and strategically dangerous.
Under Luxembourg tax law, corporate income tax (equivalent to corporate tax) consists of three inseparable elements:
– Corporate Income Tax (IRC): fixed rate of 17% at national level
– Employment Fund Contribution (IF): 1.19% of IRC (i.e., 0.2023% of taxable income)
– Municipal Business Tax (ICC): variable rate depending on the municipality of establishment
The ICC is therefore not a peripheral or accessory tax burden, but rather a structural and legal component of profit taxation in Luxembourg. Any financial model, business plan, or tax forecast that does not properly integrate it mechanically distorts the effective tax rate and underestimates the actual tax burden.
Impact on the Effective Tax Rate
The effective tax rate of a Luxembourg company is calculated according to the following formula:
– Effective corporate tax rate = IRC + IF + ICC (variable by municipality)
– Concretely, for a company established in Luxembourg City (ICC multiplier rate of 6.75% in 2026), the overall effective tax rate stands at approximately 24.94%. For a company established in a municipality applying a different multiplier rate, the effective rate varies proportionally.
Comparative example:
– Luxembourg City (ICC rate 6.75%): overall effective tax rate = 24.94%
– Municipality with higher ICC rate (example: 9%): overall effective tax rate = 26.01%
– Municipality with lower ICC rate (example: 5%): overall effective tax rate = 24.21%
A differential of 1 basis point on the effective rate represents, for a company generating 1 million euros in taxable profit, a tax burden difference of 10,000 euros per year. At the scale of a multi-company group or over several fiscal years, these differences quickly become significant and directly impact net profitability and distributable cash flows.
Practical Consequences for Companies
The variations in ICC 2026 multiplier rates produce concrete and measurable effects on several dimensions of business management.
Impact on Net Profitability After Tax
The overall effective tax rate directly influences net profitability after tax. A variation of 0.5 to 1 percentage point on the effective tax rate can significantly modify consolidated net margins and, consequently, financial performance indicators (ROE, ROA, EBITDA after tax).
Consequences for Valuation Models
Business valuation models (DCF, post-tax multiples) integrate the effective tax rate as a determining variable. An error in estimating the ICC rate distorts discounted forecast cash flows and can lead to significant overvaluation or undervaluation of enterprise value.
Influence on Distributable Cash Flows
Distributable dividends depend on net income after tax. A higher ICC charge mechanically reduces the company’s distribution capacity, with potential consequences on shareholder remuneration policy and contractual distribution commitments (shareholders’ agreements, credit covenants).
Impact on Operational Establishment Decisions
For multi-entity groups or companies in the structuring phase, choosing the municipality for the registered office or permanent establishments constitutes a legitimate tax optimization lever. ICC 2026 rates must be integrated from the strategic reflection phase to ensure an informed decision.
Particularly Affected Business Cases
Certain business configurations face heightened tax stakes related to ICC rate variations.
Holdings with Operating Activities
Holding companies (SOPARFI, SPF) simultaneously conducting commercial or service provision activities generate taxable income subject to IRC and ICC. Optimizing their municipal location can generate substantial tax savings.
Multi-Company Groups Established in Several Municipalities
Groups with several legal entities established in different Luxembourg municipalities must analyze the effective tax rate municipality by municipality and, if necessary, consider internal reorganizations to standardize or optimize the consolidated tax burden.
Growing Companies with 2026-2028 Financial Projections
Fast-growing companies developing multi-year business plans must imperatively integrate ICC 2026 rates into their tax forecasts. An estimation error can distort net income forecasts and compromise the plan’s credibility with investors or banks.
Post-Acquisition Structuring
Merger and acquisition transactions frequently involve post-closing legal and tax restructuring. The choice of municipality for reorganized entities must integrate the differentiated impact of municipal ICC rates from the negotiation phase.
Registered Office versus Permanent Establishment Trade-offs
For foreign companies with a permanent establishment in Luxembourg or considering creating a Luxembourg subsidiary, the precise geographical location of the taxable activity constitutes a decision parameter to analyze upstream.
Operational Recommendations
Facing the publication of ICC 2026 rates, we recommend that Luxembourg companies and international groups established in the Grand Duchy adopt the following measures.
1. Update Tax Simulations
Immediately update corporate tax calculation models by integrating the ICC 2026 multiplier rates applicable to each group entity. This update must be completed before preparing 2026 budgets and multi-year forecasts.
2. Verify the Actual Effective Tax Rate
Precisely calculate the post-ICC effective tax rate for each Luxembourg company in the group, taking into account municipal specificities. This verification helps identify any discrepancies with assumptions used in previous business plans.
3. Adjust Financial Forecasts
Correct forecasts for net income, cash flows, and distributable dividends based on actually applicable ICC 2026 rates. This correction ensures the reliability of forecast financial documents presented to governance bodies and financial partners.
4. Reassess Municipal Establishment
For companies with flexibility in choosing their location (registered office transfer, creation of new subsidiaries, internal reorganization), analyze the opportunity of establishing in a municipality applying a more favorable ICC rate, in absolute respect of economic substance and legal reality rules.
Fundamental principle: Legitimate tax optimization begins with accurate calculation and rigorous anticipation. It is not discovered at the time of filing the tax return, in the form of an unpleasant surprise.
Conclusion
ICC 2026 multiplier rates do not constitute secondary administrative information or a pure formality. They represent a structural tax lever of Luxembourg corporate income tax and directly impact the effective tax rate, net profitability, and companies’ distribution capacity.
Integrating these rates now into 2026 tax and financial forecasts improves financial visibility, informs strategic establishment decisions, and avoids any unpleasant surprises when closing the fiscal year.
For any questions regarding optimizing your tax burden or analyzing the impact of ICC 2026 rates on your specific situation, the PCG team remains at your disposal for personalized support.
