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.
In order to be obtain a Luxembourg tax residency, an expat must fulfill one of the conditions:
A permanent place of residence is a property, house or apartment that one has acquired and intends to live in permanently or for an undefined, but sufficiently long, period of time.
An expat who has not acquired real estate can still be considered a tax resident if he or she has a place of residence where the individual resides regularly for a significant period of time. For example, a long-term rented house or apartment.
A person who spends more than 183 days in Luxembourg in a calendar year is considered to be a tax resident, regardless of whether he has a permanent home or habitual residence in Luxembourg.
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In order to become a tax resident, one must:
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.
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.
This involves a special request to the Luxembourg tax authorities. The request must contain the following information:
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.
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.
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.
For example, 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. In most cases, the income will be taxed in France and Luxembourg will deduct the taxes paid in France from the amount of taxes to pay here.
You can consult the full list of double taxation agreements for each country of the European Union on the website of the European Commission.
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.
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.
Residents of Luxembourg are taxed worldwide on their income. Their tax rate varies depending on the amount of income received, from 0% to 43%. However, Luxembourg offers various tax deductions and incentives, for example, for charitable contributions and childcare expenses.
Residents of Luxembourg are taxed annually on their assets. The tax rate ranges from 0.5% to 1.5% depending on the value of the taxable assets.
Luxembourg has a VAT system that applies to the majority of goods and services. The standard rate is currently 16%, with reduced rates of 3% and 8% for certain goods and services.
Luxembourgers, whether employed or self-employed, are required to pay social security contributions. The payments serve to fund various social programs, such as health care and pensions.
In Luxembourg, we have inheritance and gift taxes. The rate of tax varies depending on the relationship between the giver and the beneficiary and on the value of the gift or inheritance.
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.
Here are some highlights that residents should be aware of about Luxembourg's tax system.
As mentioned above, a Luxembourg tax resident is someone who spends more than 183 days in Luxembourg in a calendar year or has a permanent residency in Luxembourg. Whether it's an owned property or rented estate.
Luxembourg has a progressive income tax system, meaning that the tax rate increases with income. Tax rates currently range from 0% to 43%. Also, the rate is affected by marital status, in some cases by age, and a number of other factors.
Luxembourg residents and non-residents must submit an annual tax declaration by March 31 of the following year. The declaration must include all income received within the tax year, as well as any applicable deductions or incentives. There is a possibility to submit a joint household tax return too.
Luxembourg provides various tax benefits for residents, such as deductions for charitable contributions, reimbursement of childcare expenses, and mortgage interest payments. In addition, there are exceptions for certain types of income, such as dividends and capital gains from the sale of certain shares. More information on what can be deducted can be found on the official state portal.
As mentioned earlier, all Luxembourg residents employed and earning an income are required to pay social security contributions.
Luxembourg has signed double tax treaties (also known as tax treaties) with more than 80 countries. Some of the countries with which Luxembourg has signed such agreements are Belgium, France, Germany, the Netherlands, Italy, Spain, Switzerland, the United States, Canada, China, Japan, India, etc.
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.
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.
Yes, indeed, it is possible. 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).
This involves a special request to the Luxembourg tax authorities. The request must contain the following information:
You can also make the tax certificate request online or by mail: no fee is charged for obtaining this document.