Verified Facts
Luxembourg's tax system is a complex mix of territorial and worldwide taxation, with tax rates ranging from 8% to 45% for individuals and a corporate tax rate of 15%, making it an attractive destination for expats and businesses alike.
Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. This is a general guide only.
Quick Facts
Tax System Overview
Luxembourg's tax system is based on the principle of territorial taxation, where residents are taxed on their worldwide income, while non-residents are only taxed on their Luxembourg-sourced income. However, there are certain exceptions and special rules that apply to foreign workers and expats. Residency rules for tax purposes are based on the 183-day rule, where individuals who spend more than 183 days in Luxembourg in a calendar year are considered tax residents.
The tax system in Luxembourg is also influenced by its membership in the European Union and its participation in international tax agreements, such as the OECD's Common Reporting Standard. This means that Luxembourg has implemented various measures to prevent tax evasion and money laundering, and to promote tax transparency. As a result, taxpayers in Luxembourg are required to report their worldwide income and assets, and to comply with various tax filing and payment requirements.
Personal Income Tax
| Income Bracket (EUR) | Tax Rate |
|---|---|
| 0 - 11,265 | 8% |
| 11,266 - 13,265 | 9% |
| 13,266 - 20,000 | 10% |
| 20,001 - 30,000 | 12% |
| 30,001 and above | 45% |
| Taxpayers in Luxembourg are entitled to various deductions and allowances, such as a personal allowance of EUR 1,150, a spouse allowance of EUR 4,050, and a child allowance of EUR 1,770. Tax returns must be filed by June 30th of each year, and taxpayers can choose to file their returns online or by mail. It is also important to note that Luxembourg has a progressive tax system, where higher income earners are subject to higher tax rates. |
Corporate & Business Tax
- The corporate tax rate in Luxembourg is 15%, with a municipal business tax ranging from 3% to 8% depending on the location.
- Small businesses with an annual turnover of less than EUR 175,000 are eligible for a reduced corporate tax rate of 10%.
- Luxembourg has several free zones, including the Luxembourg Free Port, which offer various tax incentives and exemptions for businesses.
- Companies must register with the Register of Commerce and obtain a value-added tax (VAT) number in order to operate in Luxembourg.
- Businesses are also required to file annual tax returns and pay taxes on a quarterly basis.
VAT / Sales Tax
- The standard VAT rate in Luxembourg is 17%, with reduced rates of 8% and 3% applying to certain goods and services, such as food, books, and hotel accommodations.
- Exemptions from VAT apply to certain activities, such as financial services, healthcare, and education.
- Tourist refund schemes are available for non-EU residents, allowing them to claim a refund of VAT paid on certain purchases.
- Businesses must charge and collect VAT on their sales, and file VAT returns on a quarterly basis.
For Expats & Foreign Workers
- Tax residency rules in Luxembourg are based on the 183-day rule, where individuals who spend more than 183 days in Luxembourg in a calendar year are considered tax residents.
- Luxembourg has double taxation treaties with over 80 countries, which help to prevent double taxation and tax evasion.
- Social security contributions are mandatory for employees and self-employed individuals, and are used to fund various social security benefits, such as pension, healthcare, and unemployment benefits.
- Remittance rules apply to foreign workers, who are required to report their worldwide income and pay taxes on their foreign-earned income.
- Expats and foreign workers may be eligible for tax relief under certain circumstances, such as if they are tax residents of another country or if they have foreign-earned income that is exempt from taxation in Luxembourg.
- It is also important to note that Luxembourg has a special tax regime for highly skilled workers, which offers a reduced tax rate of 15% on their employment income.
Crypto & Investment Income
- Investment income, such as dividends and interest, is subject to a withholding tax of 15% in Luxembourg.
- Capital gains are subject to a tax rate of 25%, or are included in the taxpayer's ordinary income.
- Cryptocurrency is considered a financial asset in Luxembourg, and is subject to capital gains tax when sold or exchanged.
- Taxpayers are required to report their cryptocurrency transactions and pay taxes on their gains, and may be eligible for tax relief under certain circumstances.