Luxembourg tax system

An expat's guide to taxes in Luxembourg

Comments0 comments

Luxembourg tax system: Learn everything you need to know about taxes in Luxembourg, including income tax, tax law and the tax authority in Luxembourg, plus how to file a tax return and get a Luxembourg VAT number.

This guide to Luxembourg's tax system includes:

Resident or non-resident?

Luxembourg residents are required to declare their worldwide income, and non-residents of Luxembourg are taxable on their Luxembourg income source only. A resident tax payer means you have been living in Luxembourg for longer than six months consecutively, and short periods of leave are not taken into account.

Non-resident taxpayers refer mostly to the large amount of Luxembourg's workforce that commutes into the country from bordering countries like France, Germany and Belgium. It can also refer to a newcomer to Luxembourg within the first six months.

Check with your country of origin on their tax treaty that will either require or exempt double taxation laws, or what paperwork is required to avoid it.

Who is taxed in Luxembourg?

A taxable unit in Luxembourg is a family's income including husband, wife, and children under the age of 18 years old. This does not mean the income of a child is taxed, but the possibilities for tax breaks from having a child is taken into account.

If one spouse is a resident and the other is not they will be taxed separately instead of jointly (joint income tax rates are generally lower for married couples, same sex marriages included). If you are in a partnership but not married, it is possible to elect to be covered as a joint income if one of the partners (or the non-resident partner) generates 90 percent or more of their total income in Luxembourg. You must be sharing the same residence in Luxembourg for at least one full year before applying.

Highly Skilled Workers tax regime

If you are living in Luxembourg as a highly-skilled international who have been recruited abroad by your company, you are entitled for the "Impatriate tax regime". You must be a Luxembourg resident, or not live 150km away from the Luxembourg border, have been employed based on skills that are not replacing another local employee, and earn a minimum annual salary of €50,000. A few more conditions must be met, but the advantage is to be able to expense costs such as relocation, school fees, rent and utilities, and even home leave of one trip per year. If you think you might be eligible for the Impatriate tax regime, talk to your employer about applying.

Income tax

Luxembourg income tax comes from income from your own business, from employment, from pensions, investments, rentals and other miscellaneous items like private assets, capital gains and casual services. If you work in Luxembourg you will have to pay income tax and follow the Luxembourg income tax law.

Capital gains on the disposal of assets held by individuals are taxable as miscellaneous income. The tax varies according to whether the asset is sold within or after a minimum holding period. There are short-term gains and long-term gains, and exemptions when moving to new dwellings for professional or family reasons.

These income tax categories are added up to determine your net total income, then reduced by applicable deductions to determine your taxable income. There are several online Luxembourg salary calculators that can assist in finding personal taxable salaries in Luxembourg by just plugging in numbers. Here are some examples:

Tax card

In 2018, there are over 20 income tax brackets that vary from 0 to 42%, with a 42% cap at earnings over €200,000. The balancing out of income tax rates also depend if the individual is single, married, divorced or widowed, with or without children, and over 64 years of age or not. This is all determined by what is written on your tax card that helps an employer calculate correctly. These tax cards are issued automatically up to 30 days after registering at the social security office (mandatory when registering in Luxembourg). A new tax card is applicable in case a resident changes address and civil status, but it's up to the resident to announce this to the authorities via specific tax form.

Tax benefits Luxembourg

Deductions and allowances

When living in Luxembourg as a Luxembourg resident there are a certain number of expenses you are entitled to deduct from your taxable income:

  • Employment income between €540 to €2,574
  • Pension income of €300
  • Social security contributions
  • Insurance premiums like life insurance, third-party liability, death, accident, illness or disability insurance contracted with another insurance company in the EU and outside the EU if the contract has been running at least six month before moving to Luxembourg.
  • Home savings and home loans
  • Debt interest on private loans, credit cards or debit bank account (max. €336 per person)
  • Mortgage interest (€1500 limit for the first six years, €1,125 for the next, and €750 for the remaining)
  • Private old age pension in Luxembourg schemes not before the age of 60 and at the latest 75 years old. Certain conditions apply to time length, age, and monthly annuities.
  • Charitable contributions (maximum €1 million or 20% taxable income)
  • Alimonies to divorced spouse (up to €24,000)
  • Lump sum of €480 (€960 for married couples)

Tax allowances and credits

There are a few different areas where Luxembourg residents can benefit from a few tax reliefs and allowances:

  • Employed tax earners are entitled to a tax credit of €300 a year, €25 per month or €1 per day.
  • Pension earners receive a tax credit of €300 a year.
  • Self-employed residents or freelancers are entitled to a credit of €300 a year.
  • Parents with children used to receive an allowance of €76.88 per month per child - but this has been merged with the family allowance so that the amount paid per child (born after 1 August 2016) is now €265 a month.
  • A single parent can also receive a tax credit of €750. There are also rebates of taxable income for expenses covering childcare costs for children under 14, and housekeeping costs for domestic work inside the dwelling of the taxpayer. These rebates have a ceiling of €3,600 per year or €300 per month.
  • Alimonies for payments to children not part of the household are a maximum €3480 per child.
  • If joint taxed couples realises their own professional income they are entitled to a joint abatement of €4,500.

Tax filing deadlines

The tax year ends 31 December every year in Luxembourg, and a taxpayer must file their return by 31 March the following year. Late filing that does not go past a few months is usually accepted. However, a late filing penalty can amount up to 10% of your final tax amount or fines up to €1,250. Quarterly taxes are due on 10 March, June, September and December.


Value Added Tax (VAT) rates increased in 2015, and as of 2018 are as follows:

  • Super-reduced rate: 3% (e.g. foodstuffs, pharmaceuticals, restaurants);
  • Reduced rate: 8%; (e.g. cleaning, repairs, heating)
  • Intermediate rate: 14% (e.g. adult clothing, wine);
  • Standard rate: 17% (e.g. alcohol, beer, adult shoes).

Guide to taxes in Luxembourg

Local tax

Local business tax applies to those who have business in the applicable municipal area and with non-residents who have permanent business establishments there. This rate can vary, but one example is 6.75% for Luxembourg City.

Inheritance tax

Inheritance tax is charged is transfers of wealth from a deceased member is not passed down to a direct line, or if the assets and wealth was in Luxembourg and is not being transferred outside the country. This varies between zero and 48% according to the value of the real estate in Luxembourg and the beneficiary relationship to the deceased.

Gift tax in Luxembourg

Gift tax depends on the relationship of the donor and donee, and rates vary between 1.8% to 14.4%.

Tax terms (French – German)

Standard of living: niveau de vie – lebensstandard
Income tax: impôt sur le revenue – einkommenssteuer
Tax declaration: déclaration fiscale – steuererklärung
VAT: TVA (Taxe sur la Valeur Ajoutée) – MwSt. (Mehrwertsteuer)

More on taxes in Luxembourg

Compare Luxembourg tax to other countries


Click to the top of our guide to taxes in Luxembourg.



Comment here on the article, or if you have a suggestion to improve this article, please click here.

If you believe any of the information on this page is incorrect or out-of-date, please let us know. Expatica makes every effort to ensure its articles are as comprehensive, accurate and up-to-date as possible, but we're also grateful for any help! (If you want to contact Expatica for any other reason, please follow the instructions on this website's contact page.)

Captcha Note: Characters are case sensitive
The details you provide on this page will not be used to send any unsolicited e-mail, and will not be sold to a third party. Privacy policy .

0 Comments To This Article