On 1 July 2026, the Luxembourg Government submitted a draft law to Parliament with the aim of strengthening the attractiveness of Luxembourg's innovation ecosystem by introducing a dedicated tax regime for employee stock options granted by innovative start-ups. The reform is intended to help young innovative companies attract and retain highly qualified employees by allowing them to participate in future value creation under a tax framework that is both competitive and legally certain.
At the same time, the draft law clarifies and codifies the tax treatment applicable to stock option plans under the ordinary rules. This codification addresses a number of long-standing uncertainties resulting from the withdrawal, in December 2020, of the administrative Circular L.I.R. n°104/2 dated 29 November 2017 and the absence of an explicit statutory framework thereafter.
The proposed rules are expected to apply to options granted as from tax year 2027.
In this ATOZ Alert, Tax Partner, Christina Leomy-Voigt, and Chief Knowledge Officer, Marie Bentley, outline the main takeaways from the proposed stock option reform.