The draft law pursues a dual objective:
- First, it introduces a dedicated tax regime for employee stock option plans (ESOPs) granted by qualifying innovative start-ups (which complements the 20% start‑up investment tax credit for individual investors applicable since 2026 – see our previous tax alert in this respect); and
- Second, it codifies and clarifies the tax treatment of stock option plans under the common tax law applicable to all companies (other than qualifying start-ups that choose to apply the regime described above).
For qualifying start-ups, the proposal is built around a simple principle: employees should be taxed when they actually realise value, rather than when they receive or exercise options (i.e. no taxation of any benefit in kind as a salary upon granting or exercise of the option). Taxation would therefore be deferred until the sale of the shares of the employer (or a company that is part of the same group), with the gain taxed at only one quarter of the global tax rate. At the same time, the bill brings greater legal certainty by embedding the common-law stock option rules directly into the Luxembourg Income Tax Law.
Bill 8782 was officially filed with the Luxembourg Parliament on 1 July 2026 and, if adopted in its current form, will apply to options granted from the 2027 tax year onwards. The legislative process will now follow the standard parliamentary procedure, including inter alia review by the Council of State and parliamentary examination before a final vote.
While the text may still evolve during this process, it already sends a strong signal regarding Luxembourg’s ambition to strengthen its attractiveness as a hub for innovative and high-growth businesses.
Our tax experts are available to assist you with the review and design of your employee benefit plans in the light of this new draft law.
