Taxes in Luxembourg: An Overview

KEY TAKEAWAYS

• Luxembourg levies income tax https://luxtoday.lu/en/knowledge/income-tax-in-luxembourg, corporate tax, VAT, and withholding taxes
• Income tax follows a progressive structure with rates from 0% to 42%
• The standard VAT rate is 17% 
• Luxtoday’s tax calculator estimates net salary based on personalized inputs
• Taxes help fund government services and infrastructure in Luxembourg
• With moderate taxes by European standards and the helpful Luxtoday calculator, managing taxes in Luxembourg is reasonably straightforward.
•  Checking the tool can provide valuable tax insights for residents and those considering moving to Luxembourg.

Luxembourg has a moderately high tax burden compared to other European countries. The government collects taxes to fund public services and infrastructure. 

The tax system in Luxembourg is complex, with taxes imposed at national, municipal, and European Union levels. 

Here, you’ll find an overview of taxation in Luxembourg and the different types of taxes that can apply to an individual.

Tax Rates

Subtitle: How much different taxes contribute to Luxembourg’s Revenue

Income Tax

Luxembourg operates a progressive income tax system, meaning the rate increases as income rises. 

In Luxembourg, an individual is liable to pay income tax when they receive income, regardless of the category or the method of collection.

However, according to the latest income scale, people earning less than €11,265 are exempt from paying tax.

Above this are all employees and pensioners who are liable to pay taxes regardless of if they are residents or not.

The standard income tax rates are:

– 0% on the first €11,265 of taxable income

– 8% on income between €11,266 and €13,137  

– 9% on income between €13,138 and €15,010

– 10% on income between €15,011 and €16,883

– 11% on income between €16,884 and €18,755

– 12% on income between €18,756 and €20,628 

– 14% on income between €20,629 and €22,500

– 16% on income between €22,501 and €26,000

– 18% on income between €26,001 and €30,000

– 19% on income between €30,001 and €35,000

– 23% on income between €35,001 and €50,000 

– 26% on income between €50,001 and €100,000

– 31% on income between €100,001 and €150,000

– 36% on income between €150,001 and €200,000

– 39% on income above €200,001

DID YOU KNOW?
In Luxembourg, married people had to pay their taxes jointly. But, from 2018, they can choose to pay individually.

Corporate Tax 

The standard corporate income tax rate is 18.19%. There is also a 7% surcharge on the portion of taxable income exceeding €30,000, bringing the maximum rate to 24.94%.

Value Added Tax (VAT)

The standard VAT rate is 17%, with reduced rates of 8% and 3% applied to certain goods and services like food, medical devices, and books.

It is the final consumer who is liable to pay the value-added tax on the products they consume. The company that collects it then pays it to the administration or authorities.

VAT is usually included in the price of all the products. If it’s not, it must then be added to the displayed price.

Withholding Taxes

Usually, employees and pensioners pay their income tax directly at the source. This means that your employer pays a net salary each month, minus the income tax due.

Anyone who is professionally active must have a tax withholding or retention slip. If you don’t have one, you can get it from the Luxembourg Tax Authority. 

Dividends, interest, and royalty payments made to non-residents are subject to a 15% withholding tax unless exemptions apply under tax treaties.

Excise Duties

Excise duties are levied on a number of products. Tobacco, alcohol, fuel, and heating oil are taxed at the time of purchase.

Merchants typically pick it up at the point of sale or delivery. They must be included in the retail price, and the merchants are liable to pay them to the authorities.

Subtitle: Excise Tax Duty on Alcohol, Tobacco, and Fuel in Luxembourg

Calculating Taxes with Luxtoday

Luxtoday provides a handy online tax calculator at https://luxtoday.lu/en/tax-calculator to estimate taxes and take-home pay in Luxembourg. Users can input details like marital status, income, and number of children to get an estimate of:

• Gross salary

• Income tax 

• Social Security contributions

• Dependency contributions 

• Net salary

The tax calculator helps provide a clear picture of how much tax is owed in Luxembourg based on particular circumstances. The easy-to-use tool offers a user-friendly way for residents and prospective residents to understand the Luxembourgish tax system.

Tax and Wealth Management

The wealth management industry is well known in Luxembourg. 

To help you increase your assets in the most tax-efficient manner possible, banks and other family offices provide a variety of financial services and investments.

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