In Luxembourg, all salaried income, property, pensions, etc. are subject to income tax. The tax rate is calculated based on overall income, status and family situation.
How are income taxes calculated? What about resident or non-resident status? How are taxes calculated for cross-border workers?
Here you will find all the answers about income tax in Luxembourg.
Calculate your tax and gross/net income
In Luxembourg, personal income tax is calculated according to a scale based on the total level of income, not on the nature of the income.
The tax deduction is calculated on the basis of a tax deduction slip. This is issued annually by the administration at the beginning of the year or when there is a change in situation.
Want to estimate your take-home pay during a job interview or salary negotiation? With our integrated tax calculator, calculate your final net income and taxes based on your gross income and family situation.
Tax card or tax deduction slip
Each job or pension is covered by a tax card or “tax deduction slip”. The tax card is sent systematically by the tax authorities to the taxpayer’s home every year. It is sent updated during the year in the case of a change in personal situation (marriage, birth of a child, …).
All tax withholding slips must be mailed to the employee’s home by mid-March at the beginning of the year. Didn’t you receive anything? Contact the RTS office where you live.
Resident taxpayers who are employed for the first time in Luxembourg receive their tax deduction form without any intervention on their part. It is issued by the Administration des contributions directes, after affiliation to the CCSS by the employer. The employee receives it within a maximum of 30 working days.
Non-resident employees (cross-border workers) working for the first time in Luxembourg must apply for a tax withholding slip as soon as they start their employment. The procedures must be carried out at the non-resident RTS office in Luxembourg, 5 Rue de Hollerich. In the following years, the employee will automatically receive a form to be completed for sending the following forms.
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 the tax authorities to identify the tax class to which you belong and therefore to calculate and withhold your tax directly at source.
If there is no withholding tax form, the employer will arbitrarily apply the most onerous tax class and withholding tax rate. This rate will be corrected upon receipt of the form by the employer. It is therefore important that it be in the employer’s possession as soon as possible.
In principle, the withholding tax form is not required in the following cases:
- pupils or students working during the school vacations, with an hourly wage net of taxes and social security contributions of less than 14 euros,
- persons working in a private household as a housekeeper,
- child care or care assistant.
How is income taxed in Luxembourg?
Withholding tax by the employer
In Luxembourg, income tax is deducted at source, whether you are an employee or a pensioner. This means that you will receive a net income, minus the amount of your income tax. Your employer will be able to calculate your tax liability to the tax authorities on the basis of a withholding tax form (see above). He will therefore be able to deduct this amount directly from the gross salary negotiated beforehand. Your employer will therefore 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.
Three tax classes are defined based on various criteria relating to marital status (single, married, divorced, widowed….), parental status (dependent children or not), resident/non-resident status and the age threshold of 64.
These tax classes are noted as 2, 1a and 1, where 2 is the most advantageous class. It 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.
As such, in the case of a cross-border household where one of the two spouses works in Luxembourg and his or her income represents more than 50% of the total amount of the household income, class 2 was applied until the end of 2017. The tax reform applicable as of January 1, 2018, shifted them to Class 1 status.
The tax is calculated on the basis of the tax return to be filled out by each taxpayer, according to the amount of his income and the associated class.
Tax returns in Luxembourg
By March 31 at the latest, the income of the previous year must be declared to the tax authorities.
The tax return can be made on paper on the appropriate form(s) sent by the administration. For your convenience, it is also possible to file your tax return online instead of on paper.
Income tax return on paper or online
Generally, during the month of February, each taxpayer liable for Luxembourg taxes receives by mail at home a paper tax return form or an invitation to declare his income electronically to the Administration des contributions directes.
How do I file my taxes online?
A tutorial has also been put online by Guichet.lu, the administrative guide of the Luxembourg government, to help you, step by step, with your tax return. Guichet.lu also offers a very concrete explanatory video to help you throughout the process of declaring your taxes online.
Be careful to respect the deadlines of your tax return. 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
Residents are people who have their tax domicile in Luxembourg, in other words, their main residence. In some cases, if a resident receives income in another country, he or she may be subject to double taxation. In many cases, a bilateral agreement governs the conditions of application of this double taxation. Find out if this applies to you.
The taxpayer will have to declare his worldwide income to the Luxembourg tax authorities, who will calculate a worldwide tax rate and the taxes due.
Non-residents are in the vast majority of cases assimilated to border workers. The tax is deducted at source, i.e. it is withheld from the salary and paid by the employer. At the end of the year, a declaration is made by the taxpayer. Corrections can then be made, resulting in additional payments or retrocessions depending on other sources of taxes or tax deductions (insurance in particular).
In any case, it is strongly recommended to consult a tax expert, at least for the first declarations, in order to better master the Luxembourg tax system and the measures applicable to your personal situation.
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