You should pay taxes in Luxembourg if your primary residence is in Luxembourg and you have been living here for more than six months.
In most cases, your tax status will be issued on your tax card, including your classification and any entitlements and adjustments you get (outlined below).
Non-residents include cross-border workers or spouses who are non-resident for work purposes. However, in some cases, resident and non-residents must file a tax return.
To check if you need to file an income tax return, the government provides guidelines here. Usually those in tax class 1 and 1a do not need to fill out an income tax return.
The deadline for filing tax returns for 2019 has been extended to 31 March 2021, and the deadline for filing tax returns for 2020 is now 30 June 2021.
These delayed deadlines have been introduced as part of the government Covid-19 measures, but under normal circumstances, tax returns for the previous year should be filed by the end of March of the following year.
Married couples have the right to choose individual tax status or must file a tax return if maintaining a Tax Class 2 status, as do those those seeking an annual adjustment of tax.
This article sets out tax classes, tax rates and circumstances for filling in a tax return. It also provides useful links to other websites with more information.
The allowances provided are for the tax year 2020, unless otherwise stated. The information given in this article is correct to the best of our knowledge but is not a substitute for professional advice.
Tax card and classes
Your tax card should be issued automatically within 30 days of registering at the social security office in Luxembourg.
You can also apply for one or update your status via the Luxembourg Income Tax Office, known as the Administration des Contributions Directes (ACD).
Your tax card will include your tax rate and deductions for entitlements such as dependent children, although you may need to register these using form 164R, particularly if your circumstances change.
Your income tax will depend on if you are single, married, divorced, widowed, with or without children and over the age of 64.
Your tax card instructs your employer to withhold a certain level of tax.
Please note that the tax withheld may not be your final tax liability, and additional tax may be due with the tax return – this is often the case for joint filers under Tax Class 2, where both taxpayers are working.
All single residents liable for income tax in Luxembourg, now also available as an option for married residents.
Single parents, widows and persons over the age of 64.
Married couples, those in civil partnerships (on request), widows and divorcees (if the spouse died or the divorce took place over the previous three years).
You can find full details of tax classifications here and view a tax card sample here.
Income tax is progressive from 0% to 45.78%, and is divided into 23 tax brackets. You can find details of the income tax bands in the Analie Tax & Consulting guide.
Tax brackets can broadly be broken down as follows:
Earnings from €11,266 to €20,625 taxed at 8.56-12.84%
Earnings from €20,626 to €45,897 taxed at 12.84-40.66%
Earnings from €45,898 to €100,002 taxed at 41.73%
Earnings from €100,003 to €150,000 taxed at 42.8%
Earnings from €150,001 to €200,004 taxed at 44.69%
Earnings above €200,005 taxed at 45.78%.
Income-tax-deductible expenses (some are deducted on the payroll, some on tax returns):
- Mortgage interest deductions (for main residence) of up to €2,000 per member of the household for first six years, €1,500 for next five years and €1,000 for subsequent years
- Professional expenses relating to employment
- An allowance of €5,000 for 100% electric cars, €2,500 for hybrid cars and €300 for bikes if purchased/registered after 1 January 2017
- Occupational and private pension scheme payments (contributions of between €1,200 and €3,200 depending on age.
- Home-purchase savings contributions (up to €1,344 if aged between 18 and 40)
- Debit interest and life assurance premiums up to €672 per member of your household
- Investment income of up to €1,500 per person (€3,000 for a married person), and there is a tax exemption on capital gains of €50,000 per person or €100,000 for a married couple
- Alimony paid to an ex-spouse up to €24,000 per year under certain conditions – you can find out more here
Extraordinary costs, and costs for children per year
- Costs for children not living as part of a household, €4,020 (where the taxpayer provides more than 50% of the support for the child)
- Tax credit for single-parent households of between €750 and €1,500, depending on income
- Domestic cost for housekeeping, cleaners, home help, care assistance and childcare costs of €5,400
An annual adjustment to your taxation can be made if you were a student for some of the financial year, worked only temporarily or are a single parent or receive certain tax relief.
Highly skilled 'inpatriate' workers
If you have been recruited to work in Luxembourg because your skills were unavailable locally, you may be classified as an 'inpatriate' or highly skilled worker with a different tax regime, which will include exemptions for relocation, school fees, rent, utilities and trips home.
You can find out more here.
You must earn a minimum annual salary of €50,000. The tax exemption can only be made available for up to five years.
EU institution workers
The Protocol of Privileges and Immunities of the European Communities applies to staff of the European institutions in Luxembourg.
This means staff pay income tax to the European Union on their salaries and pensions that is withheld at source.
Employees do not pay national income tax.
The tax scale is also progressive and divided into income brackets from 0% to 45%, which is adjusted on a regular basis by the Council of Ministers of the European Union.
Who should file a tax return?
- If your taxable income exceeds €100,000
- If there is a combination of several incomes (wages and pensions) that exceeds €36,000 for taxpayers in Class 1 and 2 or €30,000 in Class 1A. This is also true for non-resident households
- If you are registered partners with a Class 2 status (filing jointly)
- If you run your own business or are self-employed
- If you earn a rental income you do not pay tax on
- If you have any form of foreign income you do not pay tax on
- If you get Luxembourg dividends or director's fees of more than €1,500 per year
- If you are a non-resident partner who has opted for joint taxation
The deadline for filing tax returns in Luxembourg is normally 31 March (for the previous tax year of January to December). However tax returns for 2019 can be filed up to 31 March 2021 and those for 2020 can be filed up until 30 June 2021.
You can file these online at MyGuichet or download a form as a resident or non-resident of Luxembourg. You'll find a list of local tax offices if you want to pick up a paper copy and return it by mail here.
Calculating your taxes
You can find out about challenging a decision by the Luxembourg Inland Revenue here.
A new tax service in English, Taxx.lu, launched in June 2018, offers to help you produce your tax statement for a flat fee of €40. It asks you to answer simple questions adapted to your personal situation and submit supporting documents. It will work out the maximum benefits for you and give you a ready-to-send tax declaration.
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