What is a tax declaration and what to do with it
The tax declaration is something that almost all Luxembourgers have to deal with sooner or later. We spoke with our readers, who have already gone through this procedure, and gathered a series of the most frequent questions and answers for you.
What is a tax declaration?
— A tax return is a document that allows the tax office to understand what your income and expenses were, so they can calculate how much you need to pay.
— It also allows you to estimate how much of a tax deduction you will get.
Do the employees fill out the declaration?
— They do. The only thing that makes it easier to work for a company is that income tax and other social charges are deducted directly from your paycheck. For instance, the solidarity fee. Otherwise, you have to do everything yourself. Fortunately, there are now electronic tools that allow you to do everything online.
The submission of a tax return is not mandatory for all Luxembourg residents. It is filed only by those taxpayers who meet the criteria prescribed by law.
— Yeah, I agree. In my case, the other problem is that I work for a non-profit organization, so basically, everything is on me. However, I've been in Luxembourg for more than 20 years, so now I am kinda used to it. Complications come in the case of those who are not familiar with the local rules, like parents! :)
How to fill the declaration correctly?
— It makes sense to start with a pay slip document. To put it simply, the annual employee's payment statement. This is a document that is usually provided by the employer. It contains information about all payments and taxes withheld by the employee: personal income tax, solidarity tax, and so on. It is important to understand that it contains only those deductions that are withheld by the company itself.
However, there are exceptions. For example, for domestic assistants and their employers, the annual certificate d'impôt comes from the CNS. First, a preliminary one to check the hours worked and wages, then a final one.
There is also a very important detail in this statement: your tax class. Since the calculations of all benefits and compensation are directly related to it, it is important to know your class.
This statement is given at the end of the work year. For example, the 2022 work year is over, and all employees should have that document already in January or February. This is the basic paper that needs to be filed together with the tax return.
Filling out a declaration is strictly individual because each person's data is different. You can't fit them into a template, like white this and that.
— That's right. I would also add that if you fill it out on your own, you have to read it very carefully. There are notes under almost every field. Most of the time they will also tell you about compensation amounts you can get on every tax item.
Compensation and tax deductions are the same?
— As I mentioned before, filing a declaration is not mandatory for everyone, but it can be beneficial because of the tax deductions. They can be called compensations, because first you pay the full amount of tax that was calculated for you, and then you get a refund in your bank account.
There are a lot of options for what you can get deductions for. You need to see which ones apply to you.
These may include:
- Supplemental Retirement Fund;
- Unforeseen expenses. For example, for medical treatment that is not covered by CNS, or a very large amount of payment;
- Paying for the services of a home care aide. This applies to cleaners. Gardeners, by the way, are not included in this. This is considered a luxury, but cleaning the house is hygiene;
- Helping parents. Of course, you won't be able to claim that you earned 40,000 and spent 30,000 on your parents. There's a definite limit to compensation there;
- Capital loss. This applies to those who are involved in investing. For example, you invested in some company's shares and they fell sharply in value and you lost your investment. Then you can be compensated. If you lose money on one thing and gain on the other, you cannot do it that way;
- Charity. There are several certified charitable foundations in Luxembourg. This includes, for example, the Red Cross. If you make a donation to such an organization from 120 euros, then you can specify it in the declaration and reduce the tax base;
It is better to specify all this in the tax office still.
However, remember that recalculation can be both in your favor if you are entitled to compensation, and in favor of the state if you have missed something or paid less than necessary!
How to prove your expenses for deductions?
— All documents are attached to your tax return and sent to the tax office. This is, in fact, your main source of proof.
— And it's very important to take care of the receipts. There is a column on page 17 of the declaration called "support for parents". When I took my parents to Luxembourg, I enclosed their Russian pension certificates. They were still getting pensions in Russia at the time. I asked them to give me all the receipts at the time because I was paying for their health insurance. But they were hiding them from me, thinking that I was trying to control them. They went to the doctor and hid the receipt!
The same goes for child support. Education expenses and trips to children's camps can and should all be confirmed in order to receive compensation. So, yes, you should keep all receipts!
Is there any way to automate the process?
— It is possible. For example, I use the service taxx.lu. This is an online resource where you can find all answers to questions, upload any documents they ask you for, and get an electronic version of the declaration. I don't even send physical letters anywhere.
Do I need to contact an accountant?
—Everyone decides for themselves here. The accountant can help sort out the details, that not everyone is aware of, clarify controversial points, and help you calculate the amount correctly.
The service of a specialist costs differently, usually 200-300 euros. On the other hand, you will be sure that you are not mistaken and save yourself a lot of unnecessary stress. Some people can orient in bureaucracy quickly and fill in the blanks themselves.
You have sent the declaration to the tax office, what next?
— Then you have to wait. After some time, you will receive a letter with a detailed calculation. It shows the base amount, the amount to be paid, and the amount that you are entitled to as compensation.
Is it possible to argue against the decision of the tax authorities?
— You can do that, of course. Normally you have three months to do this. If you find a mistake or have forgotten something, feel free to write to the inspectors and sort it out.
So if I forget something, it can be sent later?
— Yeah, you can. This has happened to me. Write a letter, attach the necessary confirmations and ask to add/remove data, depending on what you need.
When to submit the declaration and what if you miss the deadline?
— I am exceptionally good at this, I usually file on time in March! If there's a delay, they can charge penalties or fines, fortunately, it hasn't come to that.
— I always file my returns by March 31, too. However, it often happens that the deadline for filing may be shifted. In any case, the tax office will definitely remind you about the return by mail.
Learn more about taxation in Luxembourg and other important topics in the knowledge library:
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