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What you need to know about taxes

Taxation in Luxembourg is a vast and rather complex field. It is worth starting with the basic principles and the types of taxes that exist.

All individuals who receive any income – be it salary, pension, royalties, income from renting an apartment, etc. – pay the income tax.

In Luxembourg the income tax is progressive, i.e. the higher the income, the higher the rate.

To determine the levy rate, first, find the total annual income after deducting all social contributions of around 12%:

0%
Amount of income tax if income for the year is less than 12,438 euros
8% - 42%
Amount of income tax if income for the year is between 12,439 and 220,778 euros, on a progressive scale
42%
Amount of income tax if income for the year is 220,779 euros or more
Taxes
Rates
Income
Learn about income tax rates
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The first thing to remember is that the amounts of payments are different for residents and non-residents.

The status of tax resident is not automatically assigned when receiving a residence permit. In Luxembourg, individuals are considered tax residents if they stay in the country for more than 6 months per year and have a domicile.

Residents

Residents pay taxes in Luxembourg from any source of income anywhere in the world, no matter where that source is located.

Non-residents

Non-residents only pay taxes on the income earned in Luxembourg.

To become a Luxembourg tax resident, an expat must meet one of the following 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
Taxes
Rates
Residency
What are the tax regimes for residents and non-residents
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Being in one taxpayer class or another directly affects how much money you will pay to the state.

There are three categories of taxpayers in Luxembourg:

1 class
A single person, that is, any person who is not married
1А class
The intermediate category that includes single parents and people over the age of 65
2 class
The reduced category, that is, spouses or couples with a registered partnership 

2 class remains in effect for 3 years after a divorce or the death of a spouse.

Taxes
Class
Benefits
How taxes depend on the class
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Another levy under an odd name is an obligatory supplement to income tax. It ranges from 7% to 9% of the tax paid amount:

9%
for individuals earning more than 150,000 euros in 1 and 1a classes or more than 300,000 euros in 2 tax class
7%
for everyone else

The maximum combined income tax rate, which includes all contribution fees and the solidarity tax, may not exceed the threshold of 45.78%

There are quite a few of them: property tax, investment income tax, transportation tax, property sales tax on movable property and real estate, VAT, an excise tax, welfare contributions, etc.

  • All consumers pay VAT for the purchase of goods, it is always included in the final price. There are 4 VAT rates in Luxembourg: 17%, 14%, 8% and 3%.
  • Social contributions are paid by everyone to maintain the health insurance system.
  • When selling movable and immovable property, there may be reduced tax regimes.
VAT
Taxes
Benefits
What taxes are paid in Luxembourg
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The fiscal year in Luxembourg runs from January 1 to December 31. All residents and non-residents must report their taxes. The exceptions are made for 1 and 1a classes, who receive less than 100,000 euros per year from a single source, such as a retirement pension.

The return declarations must be filled out and signed by the competent tax authority by March 31 of the following year after reporting due year. Penalties for late filing stand: 10% of the tax amount for late filing and another 0.6% penalty for each month of delay.

The declaration must be filled out in paper form and sent to the Luxembourg Tax Office (ACD) or submitted online.

To file the declaration online
Follow these steps carefully
Take extra care to fill in the fields correctly
*The mandatory items are marked with red asterisks.
Log in to your account on Guichet.lu.
Select your tax status.
Resident or non-resident
Follow the on-screen instructions in your next steps.
Follow these steps carefully
Take extra care to fill in the fields correctly
*The mandatory items are marked with red asterisks.
Taxes
Declaration
Income
Which tax declarations to fill and when
Read more
What is a tax declaration and what to do with it
Responses from Luxtoday readers
Responses from Luxtoday readers
Our subscribers who have already filed and reported their income have shared their experiences.