Taxes in Luxembourg: What You Need to Pay

When you move to Luxembourg, income tax is by no means the only tax you may encounter. VAT on your purchases, property tax if you own a home, fees associated with buying a home, vehicle tax, and even inheritance tax: the taxes and fees you’ll face depend on your personal situation, your assets, and your expenses.

What are the main taxes in Luxembourg? Who has to pay them? When are they due? This guide provides an overview of the taxes that may apply to individuals and new residents, with links to our detailed guides when further explanation is needed.

What are the main taxes in Luxembourg?

There is no single tax to which all residents are subject. Some taxes apply to almost everyone, such as VAT, while others depend on your circumstances: income, real estate purchases, home ownership, vehicle ownership, inheritance, or gifts.

Tax	Who is affected?	When is it due?
Income Tax	Employees, retirees, and individuals with taxable income	On income earned during the year
VAT	Consumers	When purchasing goods and services
Property tax	Property owners	Every year
Registration and recording fees	Real estate buyers	Upon purchase
Road Vehicle Tax	Owners or holders of affected vehicles	Annually
Inheritance tax	Certain heirs	Upon the death of a decedent
Gift taxes	People receiving certain assets as gifts	Upon the gift
Municipal taxes	Depending on the municipality and the situation	Depending on the tax in question

Income Tax in Luxembourg

Income tax is the main direct tax faced by individuals. It may apply to salaries, pensions, real estate income, investment income, or certain other categories of income.

Luxembourg uses a progressive tax scale: the tax rate increases in brackets as taxable income rises. Therefore, do not confuse the marginal rate corresponding to the highest bracket reached with the average rate actually applied to total income.

For employees and retirees, a portion of the tax is generally withheld directly at the source. However, this withholding does not necessarily mean that the taxpayer’s final tax liability has been settled.

To understand how personal income taxation generally works, see our tax guide on personal income taxes in Luxembourg.

You can also review our explanations on withholding tax in Luxembourg and our guide to filing income tax returns.

VAT in Luxembourg

Value-added tax, or VAT, is an indirect tax paid by the consumer when purchasing many goods and services. It is generally included directly in the listed price.

Luxembourg applies several VAT rates depending on the nature of the product or service:

VAT Rates	Category	Principle
17%	Standard rate	Applies to most goods and services not subject to a specific rate.
14%	Intermediate rate	Applicable to certain categories specified by law.
8%	Reduced rate	Applicable to certain goods and services eligible for a reduced rate.
3%	Super-reduced rate	Reserved for certain categories of goods and services specified by law.

For an individual, VAT is therefore primarily a consumption tax. However, it can become a significant financial consideration when undertaking a real estate project or major renovations.

What taxes and fees are involved when buying a home?

Buying an apartment or a house in Luxembourg involves specific tax costs that must be factored into the purchase budget.

In particular, the buyer may be subject to registration and title transfer fees when purchasing the property. However, certain provisions may reduce the tax cost of purchasing a primary residence if the specified conditions are met.

Tax obligations don’t end with the purchase. Once you become a homeowner, you may also be subject to property tax.

Find our practical advice in our section dedicated to housing in Luxembourg.

Property Tax in Luxembourg

Property tax is a local tax levied on real estate. It therefore applies to homeowners rather than renters.

Its calculation depends, in particular, on the property’s assessed value and the rate set by the municipality. The amount can therefore vary depending on the property and the municipality in which it is located.

If you’re buying a home in Luxembourg, it’s helpful to distinguish between the tax costs paid at the time of purchase and those that will be due later while you own the property.

Are capital gains on real estate taxed?

The sale of real estate may also have tax implications. The treatment of capital gains depends, in particular, on the type of property, the length of ownership, and the taxpayer’s circumstances.

A primary residence and an investment property are not necessarily subject to the same rules.

Before selling a property, it is therefore advisable to assess the tax implications of the transaction—not just the expected sale price.

Vehicle Tax: How Much Do You Pay for a Car in Luxembourg?

Driving a vehicle registered in Luxembourg on public roads is, with some exceptions, subject to an annual motor vehicle tax.

For newer passenger cars, the tax is calculated based in part on CO2 emissions. For certain older vehicles or other vehicle categories, different criteria may apply.

Exemptions or refunds are available in certain specific situations.

This tax should not be confused with registration fees, insurance premiums, vehicle inspection fees, or parking fees.

Local taxes: Why do they vary depending on where you live?

Certain expenses related to daily life are the responsibility of municipalities. Their nature and amount may therefore vary depending on the municipality where you live.

Depending on the case, these may include fees or taxes related to certain municipal services, waste management, or local administrative procedures and services.

When comparing the cost of living across several municipalities in Luxembourg, these expenses are generally secondary to housing costs, but they can still vary from one municipality to another.

What are the inheritance and gift taxes in Luxembourg?

The transfer of an estate may be subject to inheritance or gift taxes. The amount of these taxes depends, in particular, on the relationship between the parties involved, the nature of the transfer, and the share being transferred.

Inheritances to direct descendants benefit from a relatively favorable tax framework in Luxembourg, while taxation can be significantly higher when the beneficiaries are distant relatives or unrelated individuals.

For expatriates, an additional challenge arises when assets are held in multiple countries.

We detail these rules in our guide to death and inheritance in Luxembourg.

Is there a wealth tax in Luxembourg?

Individuals are not subject to a general wealth tax in Luxembourg.

However, this does not mean that assets are entirely exempt from taxation. For example, a property owner may be liable for property tax, a capital gain may be taxable upon the sale of a property, and the transfer of assets may trigger inheritance or gift taxes.

Luxembourg’s wealth tax currently applies to corporations subject to this regime and should therefore not be confused with the wealth taxation applicable to individuals.

Which taxes apply to you based on your situation?

To quickly identify the taxes you may face, start with your personal situation rather than trying to grasp the entire Luxembourg tax system.

Your Situation	Taxes to Check	Keep an eye on
You work in Luxembourg	Income tax	Withholding tax, tax returns, and tax deductions.
You’re buying a home	Purchase-Related Taxes and Property Tax	Purchase costs and taxation while owning the property.
You’re Renting a Property	Tax on rental income and property tax	Income, deductible expenses, and potential capital gains.
You own a car	Annual vehicle tax	Amount based on the vehicle’s specifications.
You have income or assets abroad	Income tax and international taxation	Tax treaties and the risk of double taxation.
You are receiving an inheritance	Possible estate taxes	Family relationship and location of assets.

Taxes: Common Mistakes to Avoid

The Luxembourg tax system is often only fully understood after moving there. However, certain misconceptions can lead you to overlook an obligation or miscalculate your budget.

Pages to consult on taxation based on your situation

• Understanding Taxation in Luxembourg
• Understanding personal income tax
• Find out if you need to file a tax return in Luxembourg
• Filing Your Tax Return
• Learn about the main tax deductions
• Understanding Withholding Tax
• Understanding the Tax Impact of Your Family Situation
• Understanding Inheritance Tax in Luxembourg

Taxes in Luxembourg: What You Need to Know

The Luxembourg tax system isn’t limited to income tax. Depending on your situation, you may also be subject to VAT, property tax, taxes related to buying a home, vehicle tax, or inheritance and gift taxes.

For newcomers, the easiest approach is to identify the taxes that apply to your specific situation: whether you’re an employee or retiree, a renter or homeowner, a vehicle owner, an investor, or an owner of property abroad. You can then explore each topic in greater depth in our specialized guides.

FAQ: Taxes in Luxembourg