In Luxembourg, an income tax is applied to all salaries, property income, pensions, etc. It is deducted at source according to an established scale.
How is income tax calculated? How does it apply? What are the differences for residents, non-residents and cross-border workers?
Here you will find all the answers about income tax in Luxembourg.
Use our integrated tax calculator to calculate your final net income and tax liability, based on your gross income and family situation.
Anticipate your taxes
Do you have an upcoming job interview or salary negotiation? Calculate your net income, after deduction of taxes.
In Luxembourg, income tax is deducted directly from your salary.
Principle of the tax withholding sheet
In Luxembourg, a tax is applied to all the income of taxpayers. Therefore, a tax card or “tax withholding slip” is issued for each employment or pension.
Tax card or tax deduction slip
The tax authorities systematically issue the tax card to the taxpayer every year. During the year, if there is a change in the taxpayer’s situation, the taxpayer also receives an update of this tax withholding form. This is the case in particular in the event of a change of job, retirement, marriage, birth of a child, etc.
All tax withholding slips must be sent by mail to the taxpayer’s home. Didn’t you receive anything? Contact your local RTS office, depending on where you live.
Tax form and first job in Luxembourg
- The resident taxpayer employee receives his tax card without any intervention on his part. The Direct Tax Administration issues the tax card after the employer has registered the employee with the CCSS. The employee receives the tax card within a maximum of 30 working days.
- Non-resident employees (cross-border workers) must apply for the tax withholding form as soon as they start working. To do so, they must contact the non-resident RTS office in Luxembourg. In subsequent years, non-resident employees will automatically receive a form to be completed for the following forms.
What to do with the tax withholding slip?
As soon as you receive your tax card from the administrative services, don’t forget to give it to your employer. This tax withholding form allows him to identify the tax class to which you belong. It will be able to calculate and deduct your tax directly at source.
If there is no withholding tax form, the employer arbitrarily applies the most onerous tax class and withholding tax rate. He will correct the rate only upon receipt of the form. It is therefore important that your employer be in possession of this tax card as soon as possible.
Who should have a tax withholding slip?
Anyone who is professionally active must have a tax retention slip. However, the withholding tax form is not normally required in the following cases:
- pupils or students working during school vacations, trainees,
- partially for all other casual workers
Taxation and payment of income tax
In Luxembourg, income tax is calculated according to the total amount of your income, your family situation and your status. It is then deducted at source.
Employees or pensioners must pay their income tax directly at source. This means that you will receive a net income, minus the amount of your income tax.
Your employer will be able to calculate your income tax on the basis of the individually issued tax deduction slip. He will therefore be able to deduct this amount directly from the gross salary negotiated beforehand. Your employer will then pay you your net salary at the end of the month.
Please note that even though salaries are taxed at source, you must still declare all your income once a year to the tax authorities. See below.
Taxation according to tax classes
The tax withholding form also determines the taxpayer’s tax class. This determines how the tax is calculated based on the total amount of the taxpayer’s income.
Three tax classes are defined according to different criteria:
- marital status (single, married, divorced, widowed….),
- parental status (dependent children or not),
- resident / non-resident status
- threshold of age 64.
These tax classes are noted as 2, 1a and 1. Class 2 is the most advantageous class.
Tax class 2 corresponds to married couples or couples in a civil partnership. Divorced or widowed persons can also benefit during the transitional period. More details on the administration’s website.
Tax returns in Luxembourg
Taxpayers must report their income annually on a tax return. This will serve as the basis for calculating the tax, depending on the amount of income and the associated tax class.
The previous year’s income must be reported to the tax authorities by March 31.
The tax return can be made :
- in paper form on the appropriate form(s) sent by the administration
- online instead of the paper declaration, for more convenience.
Income tax return on paper or online
Usually in February, each taxpayer receives a paper tax return by mail or an invitation to file electronically.
The declaration is made to the Administration of Direct Taxes.
How to file your taxes online?
Guichet.lu, the administrative guide of the Luxembourg government, has also put a tutorial online. This document will guide you through your tax return, step by step. Guichet.lu also offers a very concrete explanatory video to help you throughout the process of declaring your taxes online.
Please note that you must respect the deadlines for declaring your income. In case of non-compliance, you may be liable for late payment interest and/or a fine.
Resident versus non-resident and cross-border tax return
Income tax return for residents
Residents are people who have their tax domicile in Luxembourg, in other words, their main residence.
In your return, you must declare all your income at the global level. The Luxembourg tax authorities will calculate a worldwide tax rate. This rate will be applied to your Luxembourg income.
In some cases, if a resident receives income in another country, he or she may be subject to double taxation. A bilateral agreement governs the conditions of application of this double taxation. Find out if this applies to you.
Income tax return for non-residents
In the vast majority of cases, non-residents are treated as border residents. Like residents, cross-border commuters have their taxes deducted at source from their wages. At the end of the year, the non-resident taxpayer must file a tax return. Corrections can then be made according to the case:
- additional taxes to be paid or
- tax retrocessions
depending on other sources of taxes or tax deductions (such as insurance).
In any case, we recommend that you consult a tax expert, at least for the first few returns. You will then be able to better master the Luxembourg tax system and the measures applicable to your personal situation.
Excise duties are levied on a number of products. Tobacco, alcohol, fuel and heating oil are taxed at the time of purchase.
The merchant collects these taxes upon delivery. They are included in the posted prices and will be returned to the administration by the merchant.
The owner of built or unbuilt property must pay a property tax to the relevant local authority. It is payable each year to the commune of residence.
This property tax is subject to reassessment in 2023.
Value Added Tax – VAT
The final consumer pays a value added tax on the products he consumes. The company that collects it then pays it to the administration.
VAT is included in the price displayed or must be added in the case of a price displayed exclusive of tax (HT).
In Luxembourg, the general VAT rate is 17%.
Necessity products benefit from a lower rate depending on the type of product.
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