Home Finance Taxes Estate and inheritance tax in Luxembourg
Last update on August 12, 2020

This guide to inheritance tax in Luxembourg will help you plan your estate if you relocate to Luxembourg from another country.

Inheritance tax in Luxembourg is based on two things – the size of the estate and your relationship to the deceased. In this guide, we explain the inheritance tax rules in Luxembourg, including advice on the following:

Luxembourg inheritance law and succession rules

A system of forced heirship applies in Luxembourg. This means that some relatives have a claim on an estate regardless of what is written in a will.

Inheritance law in Luxembourg dictates that a certain percentage of the estate must be reserved as follows:

  • At least 50% to the children (if there is only one child);
  • At least 66.6% to the children (if there are two children);
  • A minimum of 75% to the children (if there are three or more children);

Children can waive their right to the reserved portion, but this has to be done formally in a declaration to the court registry.

Laws for surviving spouses

Surviving spouses are not protected heirs like children, but arrangements can be made through the marriage contract to ensure that spouses receive either:

  • Ownership of the unreserved portion of the estate and lifetime use (usufruct) of the reserved portion;
  • Usufruct of the whole estate

These arrangements can only apply if the deceased’s inheriting children are also the children of the spouse.

Distribution of the estate

Aside from the portion of the estate reserved for forced heirship, a person may distribute the remainder of their assets as they wish.

inheritance tax in luxembourg

If no will has been left, then the laws of intestate succession apply. This means that the estate would be distributed in the following order of priority:

  • Children and their descendants (e.g., grandchildren, great-grandchildren);
  • The surviving spouse;
  • Parents and their descendants (e.g., siblings, nieces/nephews);
  • Grandparents and their ascendants (e.g., great-grandparents);
  • More distant relatives (e.g., aunts, uncles, cousins);
  • The state

When a person is survived by both their children and a spouse, the spouse has a choice between usufruct of the whole estate or ownership of the unreserved portion of the estate (not less than 25%). Registered partners are treated the same as spouses under inheritance law in Luxembourg.

The matrimonial regime between deceased and spouse determines which assets are included as part of the estate:

  • Community regime (the default regime): all assets are co-owned except those acquired before the marriage or through inheritance or gift.
  • Universal co-ownership regime: everything is co-owned.
  • Separate ownership regime: each spouse retains sole ownership of assets.

Using the inheritance rules of your home country

If you are an expat living in Luxembourg with EU citizenship and want the inheritance laws of your country of nationality to apply, you’ll need to express this clearly in a will or separate declaration.

These laws will then apply as long as they don’t contravene Luxembourg’s public policy (e.g., discrimination of heirs based on gender or if born out of wedlock).

The EU rules do not apply to the following matters linked to your inheritance:

  • Inheritance taxes;
  • Your civil status;
  • The property regime of your marriage/partnership (how your property should be divided after the death of your spouse/partner);
  • Matters concerning companies

Luxembourg inheritance tax

Inheritance tax in Luxembourg is levied on the estate of all tax residents. It is usually payable by the beneficiaries on the whole estate, with the exception of real estate owned abroad.

Movable assets abroad owned by foreign residents are also exempt if they are instead taxed in the country of nationality.

inheritance tax in luxembourg

Inheritance tax rates in Luxembourg vary depending on value of assets and relationship between deceased and beneficiary.

They also vary depending on whether they regard the reserved portion, or the remaining unreserved portion.

The current rates are as follows:

Inheritance tax rates on estates of up to €10,000

Relationship

Tax (reserved portion)

Tax (unreserved portion)

Direct descendants/ascendants

None

2.5–5%

Spouse/partner with children

None

None

Spouse/partner with no children

5%

5%

Siblings

6%

15%

Uncles, aunts, nieces, nephews

9%

15%

Adopting parents/adopted children

9%

15%

Great-uncles, aunts, nephews, nieces

10%

15%

Unrelated parties

15%

15%

Inheritance tax rates on estates of more than €10,000

The basic inheritance tax rates in Luxembourg are increased if the taxable value of your portion of inheritance is more than €10,000. They increase by the following amounts:

Taxable amount

Percentage increase from base rate

€10,000–€20,000

10%

€20,000–€30,000

20%

€30,000–€40,000

30%

€40,000–€50,000

40%

€50,000–€75,000

50%

€75,000–€100,000

60%

€100,000–€150,000

70%

€150,000–€200,000

80%

€200,000–€250,000

90%

€250,000–€380,000

120%

€380,000–€500,000

130%

€500,000–€620,000

140%

€620,000–€750,000

150%

€750,000€–€870,000

160%

€870,000–€1,000,000

170%

€1,000,000–€1,250,000

180%

€1,250,000–€1,500,000

190%

€1,500,000–€1,750,000

200%

Over €1,750,000

220%

How much inheritance tax will I pay?

The government provides the following example calculation, based on an inheritance of €550,000.

The applicable base rate (first table) on this inheritance is 6%, plus a 140% increase (second table) as the estate is worth €550,000. So the rate would be calculated as follows:

  • Base rate = 6%
  • Increase = 140%
  • Applicable rate = 6% + (6% x 1.4) = 14.4%

Inheritance tax due: €550,000 × 14.4% = €79,200.

Transfer tax in Luxembourg

If the deceased’s most recent home was not located in Luxembourg, the estate may instead be subject to transfer tax.

The brackets for transfer tax are identical to those for inheritance tax, though some movable assets (such as bank account funds) are not subject to transfer tax.

Paying inheritance tax in Luxembourg

Inheritance and gift taxes in Luxembourg are collected by the Registration Duties, Estates and VAT Authority (Administration de l’Enregistrement et des Domaines, or AED).

To pay inheritance tax, you’ll need to file an inheritance tax declaration. The AED will assess the declaration and send a request for payment.

Inheritance tax payments are due within six weeks of the assessment being finished.

inheritance tax in luxembourg

Luxembourg has no double tax treaties with other countries for inheritance and gift tax purposes.

Reducing your inheritance tax in Luxembourg

Inheritance tax is calculated based on the total value of real estate in Luxembourg and movable assets (such as cars, furniture, or money) anywhere in the world.

To calculate your bill, you’ll first need to deduct any liabilities from the amount inherited. These can include any existing debts and the cost of the deceased’s funeral.

There is a tax-free allowance on small inheritances with a net value of up to €1,250. Spouses without children have an allowance of €38,000, and charities are exempt from the tax.

Some other tax exemptions include anything acquired with a partner (and bound by a partnership declaration) at least three years before death, as well as buildings located abroad.

In theory, assets gifted before death are not subject to inheritance tax, but property donated in the year prior to death may be reinstated for tax purposes.

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