If you worked in any of these countries, you could be due a Tax Refund

The international worker’s guide to Luxembourg taxes

#TaxTipsGeneral

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.com 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 in Luxembourg, with some exceptions.

You will be considered a resident for tax if you have residence in Luxembourg or have lived in Luxembourg 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 in Luxembourg, you will be considered a non-resident.

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

Both residents and non-residents are taxed on Luxembourg-sourced income only. The Income from outside Luxembourg 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 Luxembourg 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 Luxembourg operating in Luxembourg.

As well as this, unlike most other countries in the EU, Luxembourg 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 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 children.

 

We provide tax refunds from 16 countries

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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 tax in a country.

In Luxembourg, there is a tax-free threshold of €11,265.

Essentially, you can earn up to €11,265 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 Luxembourg income tax rate will depend on how much you earn. Therefore, your salary after tax in Luxembourg will be determined by the rate at which you pay tax.

The taxes in luxembourg 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 in Luxembourg will be shaped by how much you earned, as you will be taxed accordingly.

The first €11,265 of any earnings received will be tax-free.

Anything more than €200,004 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 2022

 

Taxable income (Euros)

Tax rates

€0 - €11,265

0%

€11,266 - €13,137

8%

€13,138- €15,009       

9%

€15,010 - €16,881

10%

€16,882 - €18,753

11%

€18,754 - €20,625

12%

€20,626 - €22,569

14%

€22,570 - €24,513

16%

€24,514 - €26,457

18%

€26,458 - €28,401

20%

€28,402 - €30,345

22%

€30,346 - €32,289

24%

€32,290 - €34,233

26%

€34,234 - €36,177

28%

€36,178 - €38,121

30%

€38,122 - €40,065

32%

€40,066 - €42,009

34%

€42,010 - €43,953

36%

€43,954 - €45,897

38%

€45,898 - €100,002

39%

€100,003 - €150,000

40%

€150,001 - €200,004

41%

€200,005 +

42%

 

 

Filing an income tax return in Luxembourg

Both resident and non-residents alike who are subjected to Luxembourg personal income tax 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 the 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 in Luxembourg 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

We provide tax refunds from 16 countries

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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 Luxembourg.

The Luxembourg tax office will ask you (or a tax agent like Taxback.com!) 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 Luxembourg 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.com!

 

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.

About The Author

Rory Lynskey - Digital Content Executive @ Taxback.com

Rory is the Digital Content Executive at Taxback.com. Rory graduated from Technological University Dublin with a degree in Journalism in 2019, and has had his work published both online and in print at a national and regional level.

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