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Taxes

Impatriate tax regime in Luxembourg

Learn about eligibility criteria for employees and employers, job-related requirements, and the comprehensive tax exemptions available. Ideal for professionals seeking opportunities in Luxembourg.

Last time updated
24.03.24

Luxembourg, aiming to boost national competitiveness, has strategically focused on attracting international talent. Central to this effort is the Impatriate Tax Regime, a fiscal policy specifically designed to help local businesses recruit top-tier professionals from around the world. This regime, first introduced in 2011, has undergone several legislative refinements. The latest version, codified under Article 115, Section 13, Letter b) of the Income Tax Law, became effective on January 1, 2021.

This article elaborates on the key aspects surrounding the Impatriate Tax Regime in Luxembourg. From insightful statistics on work-related immigration to elucidating the eligibility criteria for both employers and employees, we explore the nuanced conditions, job requisites, and the invaluable benefits this regime offers. Join us as we unravel the intricacies of Luxembourg's Impatriate Tax Regime, shedding light on its impact and advantages for businesses and globally sourced talents alike.

Work-related immigration in Luxembourg

Luxembourg stands as an alluring destination, drawing individuals with its elevated quality of life and competitive salaries. In 2022 alone, 3,204 people migrated to Luxembourg for work-related reasons, showcasing a consistent upward trend over the past decade, except for 2020, where the COVID crisis led to a temporary dip in immigration.

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Source: Eurostat

This thriving influx comprises highly skilled professionals, a cohort eligible to leverage the impatriate tax regime. In the upcoming section, we will dig deeper into the specific criteria that define who can benefit from this tax regime, exploring the facets that make Luxembourg an increasingly favored hub for skilled workers seeking both professional opportunities and financial advantages through the impatriate tax regime.

Who can benefit?

Not all workers can avail themselves of the Impatriate Tax Regime; it is exclusively designed for individuals classified as "impatriates" under Luxembourgish law. This category encompasses:

  • Employees dispatched by a foreign company within an international group to work in Luxembourg, benefiting a Luxembourgish company within the same international group.
  • Individuals hired from abroad by a Luxembourgish entity or a company established in another European Economic Area member state to work within said company.

What conditions must be met by the employee and the employer?

Being classified as an impatriate is just the first step; both employees and their hiring companies must meet specific requirements. In the upcoming section, we'll explore the essential conditions that both individuals and employers must fulfill to qualify for Luxembourg's impatriate tax regime.

Conditions for the employee
Conditions for the employer

What characteristics must the job meet?

In addition to employee and employer conditions, specific job-related criteria shape eligibility for the Impatriate Tax Regime. The employee must:

  • Be employed for a job that is their main professional occupation.
  • Earn an annual fixed salary in Luxembourg of at least 100,000 euros gross.
  • Apply specialized knowledge and expertise for the benefit of the company's workforce.

Crucially, individuals seeking this regime cannot replace other employees outside the scope of this fiscal framework.

What are the benefits of the impatriate tax regime?

Highly qualified employees meeting the aforementioned criteria can benefit from the impatriate tax regime for a maximum period of eight years. This regime offers partial or total tax exemptions for expenses, whether in kind or cash, directly associated with the expatriation process. The mechanism involves attributing a range of employee expenses as operational costs for the company, thereby excluding them from the employee's taxable income.

Outlined below are these expenses eligible for the regime, provided the amounts remain within reasonable limits:

Non-recurrent costs of relocation

  • Moving expenses to transfer the employee's residence to Luxembourg.
  • Travel expenses for the employee, spouse, or partner, and household children, including accommodation costs during the journey.
  • Dismantling, packing, loading, transporting, unloading, unpacking, and assembling furniture belonging to the employee or a family member.
  • Expenses for transformers or adapters for foreign electrical appliances.
  • Housing arrangement costs in Luxembourg, encompassing the purchase of furniture or household appliances such as dishwashers, washing machines, or dryers.
  • Travel expenses due to special circumstances like childbirth, marriage, or the death of a family member.
  • Final return expenses to the home country at the end of the employee's assignment, including the costs incurred for moving.

Recurring expenses after the move

Depending on the type of expenses, there are specific limits for them to fall within the framework of this regime.

Housing, travel, and tax equalization compensation expensesItem header
Impatriation bonus
Additional school fees

The impatriate tax regime thus provides a comprehensive framework for relieving qualified employees and their employers from a significant portion of the financial burdens associated with international assignments. By incorporating these benefits, Luxembourg not only incentivizes the influx of skilled professionals but also fosters an environment conducive to economic growth and cross-border talent exchange.

faq

Frequently Asked Questions (FAQ)

What benefits does the impatriate tax regime bring to employees in Luxembourg?

What is the maximum duration an employee can benefit from the impatriate tax regime?

Who qualifies as a highly qualified employee under the impatriate tax regime?

Is there a minimum annual salary requirement for employees to qualify for the impatriate tax regime?

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We took photos from these sources: Volkan Olmez for Unsplash, Eurostat

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