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25.9 Evaluate Luxembourg Government Grants and Investment Incentives

Government Support Programs​

Luxembourg offers various incentives for SMEs, including:

  • Luxinnovation: Support for innovation, digitalization, R&D
  • House of Entrepreneurship: Guidance, grants, financing support
  • SNCI (SociĂ©tĂ© Nationale de CrĂ©dit et d'Investissement): Loans, quasi-equity
  • Ministry of the Economy: Investment aid (regional, environmental, tourism)
  • Chamber of Commerce: Training, subsidies

Investment Aid Types​

  1. Regional Investment Aid: For SMEs in specific regions
  2. Digitalization Aid: Support for IT investments
  3. Environmental Aid: Energy efficiency, renewable energy
  4. Training Aid: Subsidies for employee upskilling
  5. R&D and Innovation Aid: Grants for product/process innovation

Eligibility Requirements​

  • Minimum investment amount
  • Job creation or retention
  • Strategic sectors (technology, sustainability)
  • Compliance with EU state aid rules
  • Detailed project plans and financial projections

Incorporating Grants into Cash Flows​

  • Treat grants as cash inflows (reduce net investment)
  • Consider timing (often reimbursed after expenses)
  • Ensure compliance (reporting, audits)
  • Account for tax implications (some grants taxable)

Example:

  • Investment: €300,000 for digital upgrade
  • Grant: 20% (€,60,000) paid over two years
  • Net investment: €240,000 (timing differences apply)

VAT Considerations​

  • VAT on capital investments recoverable if business is VAT-registered
  • Cash flow impact: Pay VAT upfront, recover later (timing gap)
  • Plan for VAT payments in cash budget

Sustainability and ESG Investments​

EU Green Deal and CSRD (Corporate Sustainability Reporting Directive) increase importance of sustainability investments. Balanced scorecard can include ESG KPIs to track compliance.

Luxembourg Compliance Note​

Keep detailed documentation for grants (applications, invoices, reports). Non-compliance can lead to clawbacks. Coordinate with advisors (fiduciaire, Luxinnovation) for application support.

Think It Through​

How can government grants change the NPV of a project? What risks should SMEs consider when relying on subsidies?