Income tax in Luxembourg

Tax is imposed on worldwide earnings regardless of the amount earned or in what capacity, unless Luxembourg has a special international treaty with the country in question to prevent double taxation (see home country).

You will be taxed on worldwide income earned from:

• trade or business;
• independent professions;
• employment;
• agriculture and forestry operations;
• rental income;
• portfolio income;
• annuities and pensions;
• any other income.

You will be able to deduct related expenses from the income earned (during the same period) and will be taxed on the net amount (adjusted gross income). It is possible to reduce this even further by taking advantage of certain tax laws in Luxembourg by investing money in services such a child minding and products such as a pension or life insurance policy.

Products and services you can invest in and deduct tax from include:

• saving life insurance – medical, third party (not casco) and life insurance;
• supplementary pension policy;
• investment funds;
• depositing money with Luxembourg building society;
• interest on personal loans;
• interest paid on mortgage loans;
• child minder, crèche or cleaner;
• office at home;
• training courses, professional literature etc.

Personal income taxations rates are progressive, varying from 0% up to 38% with a 2.5% surcharge for the unemployment fund (bringing the marginal income tax rate to 38.95%). Married couples with joint income file jointly and civil partners who have lived together for a full tax year can also elect to file jointly.

There are three tax classes depending on the individual’s personal situation:

• tax class 2 – married taxpayers; widowed persons (for three years following year they became widowed); divorced or separated persons (for three years following); civil partners who elect to file jointly;
• tax class 1a – widowed persons (not included in tax class 2); individuals aged 65 or over on January 1st; single parents;
• tax class 1 – taxpayers not included in tax class 2 or 1a.

Tax card

Each year you will be sent an income tax card (fiche de retenue d'impôt) with details of your tax class, tax rate and salary deductions. If you have two or more jobs you will be sent a tax card for each job. Joint tax payers will both be sent a card, numbered in the top left-hand corner (1 being the main earner etc.).

You must give this card to your employer as soon as you receive it, as failure to do so could mean that you will have to pay the highest level of income tax, until your employer is able to process the card.

End of year tax return

Not all tax payers in Luxembourg are subject to returning a tax return but those who are must have returned it by March 31st of the following tax year (extension is possible on request). You can download a tax return form in either French (form 100F) or German (form 100D) by clicking here.