Navigating Taxation in Luxembourg as an International Worker

Have you recently arrived in Luxembourg to live and work?

From the moment you start receiving income as a foreign national in Luxembourg, tax may be deducted from your earnings.

However, how much do you actually know about your tax entitlements and responsibilities when working in Luxembourg?

The Taxback team have put together this handy guide to cover everything about income tax in Luxembourg for foreigners.

What will I pay tax on in Luxembourg?

Luxembourg taxation is similar for residents and non-residents, with some exceptions.

You will be considered a resident for tax purposes if you have lived in the country for a consecutive period of six months or more.

As a resident, you can file an income tax return or the simplified tax equalization. If you don’t have a registered address, you will be considered a non-resident.

Both residents and non-residents can submit tax equalization forms in case their income outside of the country doesn’t exceed 25% of their worldwide income.

Both residents and non-residents are taxed on Luxembourg-sourced income only. The Income from outside is used only to determine the correct tax rate.

Luxembourg has tax treaties with more than 80 other countries. These documents ensure that there is no double taxation on a worker’s income.

Luxembourg is described by watchdogs as one of 16 worldwide tax havens. Luxembourg Wealth Tax, as of 2006, has been removed for individuals both resident and non-resident.

This is especially the case for businesses, where net worth tax is at a 0.5% rate on the total net realisable value.

This relatively low net wealth tax is one of the reasons many businesses favour operating in Luxembourg.

As well as this, unlike most other countries in the EU, inheritance tax is not very high.

It is calculated on the net value of what the estate is - this includes both immovable assets within the country as well as movable assets in Luxembourg and abroad.

Children take priority when it comes to inheritance tax - 50% of the net worth of the estate will go to an only child, 66.6% to two children, and 75% to 3 or more children.

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What is the tax-free threshold in Luxembourg?

A tax-free threshold indicates the amount of income you can earn without paying taxes in a country.

There is a tax-free threshold of €12,438.
Essentially, you can earn up to €12,438 without paying tax!

How much tax will I pay in Luxembourg?

Income tax in Luxembourg is progressive.  This means that the more income you earn, your income tax rate will depend on how much you earn. Therefore, your salary after tax will be determined by the rate at which you pay tax.

The taxes for expats are one of the main pull factors to the region.

Luxembourg taxation rates range from 0% to 42%, depending on how much you earn. Essentially, your salary after tax will be shaped by how much you earn, as you will be taxed accordingly.

The first €12,438 of any earnings received will be tax-free.
Anything more than €220,788 will be taxed at 42%.

You can see below a table outlining rates for Luxembourg personal income tax.

Rates of tax to be paid

Luxembourg income tax rates

Filing an income tax return in Luxembourg

Both resident and non-residents alike who are subjected to Luxembourg personal income tax will need to file an income tax return.

This is done by filing Form 100.

To file a tax equalization (Lohnsteuerausgleich) you need to submit form 163 RD for residents or 163 NRD for non-residents.

When is the Luxembourg tax deadline?

The Luxembourg tax year is the same as the calendar year.

The tax deadline falls on 31 March every year if you are obligated to file a tax return. Otherwise, you have time until 31st December of the following year.

If you owe money to the Luxembourgian tax authorities, you will need to file on or before this date.

If you do not file on time, you may be hit with fines and penalties (more on this later).

What if I don’t file a tax return?

If you owe money to the tax authorities in Luxembourg, it is a good idea to file your tax return and pay the outstanding amount ASAP.

That’s because you may be fined or penalized for not filing on time.

Beginning at the start of the month after the due date of the payment, you can expect to be fined 0.6% of the total payment per month.

You can always request an extension to the original deadline, meaning you’ll have four more months to file. Once that time elapses, you’ll be charged the following rates:

• 1% each month - months 5 to 12
• 2% each month - from 1 to 3 years
• 6% per month indefinitely after 3 years

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What is a Certificat de Remuneration/Certificat de Salaire ou de Pension?

These are official government forms that you should receive from your employer either at the end of your employment or the end of the tax year.

It will outline all your earnings and the amount of tax you’ve paid for the year.

If you do not receive or have lost your Certificat de Remuneration, let us know by emailing luxembourg@taxback.com and we can get it for you.

You’ll need it to apply for your tax refund!

What to do if you earned money outside of Luxembourg during the year

If you worked in Luxembourg for nine months or less, you should outline on your tax return if you earned money outside of the country.

The Luxembourg tax office will ask you (or a tax agent like Taxback!) this information when submitting your tax refund application so it’s a good idea to outline this when you are doing it.

What expenses can I claim in Luxembourg?

There are certain expenses that can be claimed to help employees in Luxembourg offset their tax bill.

Below is a list of expenses that can be claimed on your tax return.

• Commuting: If you have to travel to your workplace, you may be able to claim up to €2,574 of the costs of getting there.
• Company car: If you have a company car, you can claim expenses on the costs if you paid to travel, you’ll need receipts and a log book to do so, however.
• Overtime work and severance pay: If you worked overtime or on a night shift, a public holiday, or Sunday, you may be exempt from certain taxes.

Luxembourg tax refunds

There’s a big chance that you could be due a Luxembourg tax refund.

This is especially the case if you overpaid on your income tax throughout the tax year.

You will need to submit Form 100 to file your tax return.

You can also apply for a Luxembourg tax refund with Taxback!

Need help with any aspect of your Lux tax? No problem! We’ll ensure you get your MAXIMUM legal tax refund from your time in Luxembourg, while also ensuring you remain 100% tax compliant.