Actual residency and Luxembourg tax residency are not the same things. Thus, an expat becomes a de-facto resident of the country as soon as he or she receives a residence permit, whereas tax residency has its own specifics.
How to determine your tax residency
OECD has created a brochure in English o sum up the information on Residency for tax purposes in Luxembourg. You can use the brochure from OECD to have memo on criteria for individuals and entities that are taxated. It also includes contact information of the main tax department in Luxembourg.
In order to be obtain a Luxembourg tax residency, an expat must fulfill one of the conditions:
To have a permanent place of residence in Luxembourg
To have a fixed place of residence in Luxembourg
To be physically present in Luxembourg
How to become a tax resident in Luxembourg
In order to become a tax resident, one must:
- Register with the Luxembourg tax authorities;
- Obtain a taxpayer identification number.
You can do this by filing an application to the Administration of Direct Contributions (ACD), Luxembourg's main tax authority.
The application must include personal information such as name, address, and date of birth, as well as information about income and employment status.
Upon registration, the taxpayer becomes subject to the Luxembourg tax system, which means that he or she will have to submit tax returns and pay taxes on any income received in Luxembourg or abroad, in consideration of any applicable tax agreements or exceptions.
Luxembourg has tax agreements with many countries to prevent double taxation and to ensure that taxpayers are not taxed twice on the same income.
What is a tax residency certificate in Luxembourg
Luxembourg Tax Residence Certificate is a document that certifies the status of an individual or a company as a Luxembourg tax resident for a specific period of time. The certificate may be necessary in order to confirm the taxpayer's residence in Luxembourg and to avoid double taxation by the foreign tax authorities.
How to obtain a tax residency certificate in Luxembourg
This involves a special request to the Luxembourg tax authorities. The request must contain the following information:
- personal or company details, including name, address, and tax identification number;
- duration for which the certificate is requested;
- a statement that the applicant appears to be a Luxembourg tax resident;
- all other relevant information, such as the purpose of the certificate or the requirements of the foreign tax authority.
You can make the tax certificate request online or by mail: no fee is charged for obtaining this document. Generally, the certificate is issued a few weeks after the Luxembourg tax authorities receive the request. You can contact the Department of natural persons or the Corporate Department.
The certificate includes such information as name, address, taxpayer identification number, and validity period. The document also contains information that the person requesting it is a Luxembourg tax resident and proof of the validity and accuracy of the information provided.
Note that a tax residency certificate does not guarantee that a foreign tax authority will recognize it in order for you to avoid double taxation. Indeed, the foreign tax authority may have special requirements or may ask for additional information or documentation.
We always recommend that you consult with a tax expert for guidance on specific Luxembourg tax regulations and requirements.
How the double taxation system works in Luxembourg
Luxembourg has signed numerous tax agreements with other countries in order to avoid double taxation. The full list of laws and documents and the current progress of DTC in Luxembourg can be found on the official website of Administration des contributions directes.
The Grand Duchy currently has 86 double tax agreements. You can consult the full list of double taxation agreements for each country of the European Union on the website of the European Commission.
Under these treaties, the income earned in country A by a resident of country B will not be taxed twice. Instead, such income will be taxed in country A, deducting the taxes already paid in country B.
If a resident of Luxembourg receives income from commercial activities in France, the income is taxable in both France and Luxembourg. However, provided that there is a tax treaty between France and Luxembourg, the agreement will determine which country has the primary right to tax the income.
Agreements have been concluded with the following countries:
Albania, Andorra, Armenia, Austria, Azerbaijan, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Brunei, Germany, Guernsey, Hong Kong, Georgia, Greece, Hungary, Jersey, Denmark, Israel, Ireland, the United Kingdom, Vietnam, Iceland, India, Indonesia, Italy, Kazakhstan, Canada, China, Cyprus, Qatar, Kuwait, Lao Democratic Republic, Latvia, Liechtenstein, Lithuania, Mauritius, Northern Macedonia, Malaysia, Morocco, Spain, Mexico, Moldova, Monaco, Mongolia, the Netherlands, Norway, the Isle of Man, Panama, Poland, Portugal, the Republic of Korea, Romania, Russian Federation, San Marino, Saudi Arabia, Senegal, Seychelles, Singapore, UAE, the Czech Republic, Croatia, Estonia, Finland, France, Japan, Slovakia, Sierra Leone, Slovenia, South Africa, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukraine, Uruguay, Uzbekistan, USA.
In addition to tax agreements, Luxembourg also offers various tax incentives and deductions to avoid double taxation, especially for foreign-source income.
For example, Luxembourg may provide an exemption for taxes on dividends and capital gains received from foreign sources under certain conditions, such as ownership of shares for a minimum period of time.
Importantly, double taxation may still occur if there is no DTC or if the agreement does not cover the particular type of income or relevant situation. In those cases, taxpayers may have to rely on domestic tax law or consult with a tax professional to still avoid double taxation.
What Luxembourg tax rules apply to residents
A well-developed Luxembourg tax system comprises direct and indirect taxes, such as income tax, corporate tax, value-added tax (VAT), wealth tax, etc. The tax system is governed by various laws and regulations, including the Luxembourg Income Tax Law, the Luxembourg VAT Law, and the Luxembourg Tax Code of Procedure.
An individual, being a Luxembourg tax resident, is subjected to Luxembourg's tax rules and regulations. Read more details about what taxes are paid in Luxembourg in the special article of our Guide. Here are some of the main tax rules that apply to residents.
Individual Income Tax
Value Added Tax (VAT)
Social security contributions
Tax on inheritance and gifts
Since 2021 taxpayers in Luxembourg can use an online platform MyGuichet.lu in order to submit the declaration of the tax return. It is a form 100, as it is called. An electronic assistant can be helpful in such cases. To use the platform, one will need a Luxtrust certificate (in any form) or an eID (electronic identity card).
One important thing to note is, as we mentioned before, that Luxembourg entered tax agreements with many countries in order to avoid double taxation. Such agreements may affect the income tax rules applicable to residents, depending on the particular situation.
Furthermore, Luxembourg tax regulations can also change from year to year. For up-to-date guidance on tax obligations and requirements, you may want to consult a Luxembourg tax expert.
What residents need to know about Luxembourg's tax system
Here are some highlights that residents should be aware of about Luxembourg's tax system.
Tax return application
Social security contributions
Double taxation agreements
It is important to mention that Luxembourg is committed to international tax transparency and compliance with international standards, including the OECD project on Base Tax Reduction and Profit Shifting (BEPS) and the Automatic Exchange of Information on Financial Accounts (AEOI) initiative.
Tax rules and regulations can change from year to year, so it is important to be aware of any changes that may affect Luxembourg tax residents' obligations.
Luxembourg Income Tax Calculator
Find out how much your salary is after tax.
Frequently Asked Questions (FAQ)
How one obtains Luxembourg tax residency
Can I pay the taxes online if Luxembourg is my country of tax residence
How to obtain a tax residency certificate in Luxembourg
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