Taxation/salaries

Working in Europe | Work permit | Luxembourg

Residents are subject to tax on their domestic and foreign taxable income. Non-residents are taxable on their domestic income arising from Luxembourg sources only.

An individual may be deemed to be a resident of the State in which he has a permanent place of residence or where he has his centre of vital interests.

Taxation in Luxembourg

 

Main types of taxation

• Income tax declared annually

• 8 categories of income (e.g. investment, real estate income or capital gains)

• Value added tax (VAT) (on goods and services)

Tax card

If you are an employee in Luxembourg, your taxcard is issued and updated automatically by the RTS office in charge, apart from the fact that non-resident taxpayers have to continue to request an update of their address and civil status by filling in the form 164 NR (www.impotsdirects.public.lu/formulaires/fiches_d_impot/index.html)

Employment income

Taxed monthly at source by the employer, on the basis of a taxcard

Value added tax

(VAT ) rates

• Standard rate: 15% (17% from 2015 onwards)

• Reduced rates: 3%, 6%, 12% (for certain services and items).

 

You work in Luxembourg and are resident abroad or you are resident in Luxembourg and work abroad

You might encounter the question of the double taxation.

Double taxation of a crossborder activity is either eliminated by the exemption or the credit method (often on the basis of a bilateral double tax treaty). Luxembourg has signed double tax treaties with more than 70 countries to avoid double taxation on individual income. In general you pay the tax in the country where you execute or realise your work (Luxembourg or abroad). And in your country of residence:

• exempt income may be taken into account to calculate the tax rate to pay or

• income tax paid in the country abroad may be deducted/credited from the tax to pay.

To be aware of all tax implications, we strongly advise you to contact your local embassy or speak to a tax consultant before signing your contract.

For more information on income tax:

http://www.impotsdirects.public.lu/legislation/memento/index.html or www.guichet.lu