Taxes in Europe Database v2
Law of 4 December 1967 on income tax, Title 1, Articles 1-157ter (Mémorial A, 1967, pp. 1228-1275), as amended by successive laws and implementing regulations, the most recent of which are:
Law of 23 December 1997 amending income tax and other provisions (Mémorial A, 1997, p. 3328);
Law of 19 June 1998 introducing dependency insurance (Mémorial A, 1998, p. 710);
Budget Law of 21 December 1998 (Mémorial A, 1998, p. 2723);
Law of 12 February 1999 on the implementation of the 1998 national action plan for employment (Mémorial A, 1999, p. 190);
Law of 8 June 1999 implementing a complementary pension scheme (Mémorial A, 1999, p. 1644);
Law of 8 June 1999 introducing pension funds (Mémorial A, 1999, p. 1476);
Budget Law of 24 December 1999 (Mémorial A, 1999, p. 2675);
Law of 22 December 2000 (Mémorial A, 2000, p. 3021);
Law of 15 January 2001(Mémorial A, 2001, p. 698);
Law of 1 August 2001 (Mémorial A, 2001, p. 2440);
Law of 21 December 2001 (Mémorial A, 2001, p. 3308);
Law of 21 December 2001 (Mémorial A, 2001, p. 3312);
Law of 30 July 2002 (Mémorial A, 2002, p. 1718);
Budget Law of 20 December 2002 (Mémorial A, 2002, p. 3235);
Budget Law of 19 December 2003 (Mémorial A, 2003, p. 3685);
Law of 22 March 2004 (Mémorial A, 2004, p. 719);
Law of 15 June 2004 (Mémorial A, 2004, p. 1568);
Law of 9 July 2004 (Mémorial A, 2004, p. 1878);
Law of 9 July 2004 (Mémorial A, 2004, p. 2020);
Budget Law of 21 December 2004 (Mémorial A, 2004, p. 2983);
Law of 21 June 2005(Mémorial A, 2005, p. 1540);
Law of 21 June 2005 (Mémorial A, 2005, p. 1547);
Budget Law of 23 December 2005 (Mémorial A, 2005, p. 3387);
Law of 23 December 2005 (Mémorial A, 2005, p. 3370);
Law of 17 November 2006 (Mémorial A, 2006, p. 3448);
Budget Law of 22 December 2006 (Mémorial A, 2006, p. 4315);
Law of 22 December 2006 (Mémorial A, 2006, p. 4710);
Law of 21 December 2007 (Mémorial A, 2007, p. 3947);
Law of 19 December 2008 (Mémorial A, 2008, p. 2622);
Law of 18 December 2009 (Mémorial A, 2009, p. 5109);
Law of 17 December 2010 (Mémorial A, 2010, p. 4094);
Budget Law of 16 December 2011 (Mémorial A, 2011, p. 4365);
Law of 21 December 2012 (Mémorial A, 2012, p. 3830);
Law of 19 December 2014 (Mémorial A, 2014, p. 4843).
Municipalities get a given percentage of the collected tax.
Grand Duchy of Luxembourg.
All individuals whose domicile for tax purposes or usual place of residence is in Luxembourg or who receive taxable income there.
The tax is assessed on the total net income, less special expenses. Total net income is calculated by taking total net income, determined separately for each of eight categories of income; losses made in one category of income may be set off against net income from other categories.
The profit made in the transfer or termination of a one-man business is reduced by an allowance of 10,000 EUR. If the profit includes a capital gain on real property, the allowance is fixed at 25,000 EUR.
Each resident tax payer can, on demand, benefit from an allowance for extraordinary expenses that are unavoidable and significantly reduce his faculty to pay. Are particularly targeted medical expenses and disability expenses.
The amounts that can be deducted depend on the taxpayers revenue and on the number of children at his expense.
The allowance for a spouse is listed on the first additional slip for tax withheld of the spouse. The allowance consists of the lump sum for professional expenses, the lump sum for special expenses and the extraprofessional allowance.
The extraprofessional allowance is an allowance granted, on demand, in case of taxation of married taxpayers. In order to benefit from this allowance both taxpayers have to generate revenues from a professional activity, or if one of them generates a business income. The extraprofessional allowance amounts to 4,500 EUR per year.
Each taxpayer having expenses related to children who are not living in his household, has the right to tax allowances. The allowance takes into consideration the real expenses without exceeding the sum of 3,480 EUR per year.
Each taxpayer, hiring an unemployed person, obtains for 36 months beginning with the month of the hiring, a monthly tax credit corresonding to 15 % of the monthly gross remuneration.
Each taxpayer obtains, on demand, a credit for life-long professional training that corresponds to 10 % of the training fees.
Each taxpayer has the right to obtain a tax credit for investments made. This credit amounts to 13% of the complementary investment or, considering the global investment, to 7% for the first block not exceeding 150,000 EUR and to 3 % for the block exceeding 150,000 EUR.
An annual sum of 750 EUR is granted to unmarried tax payers as tax relief or tax credit.
Each taxpayer who generates an income from a paid occupation has the right to obtain an annual tax credit that amounts to 300 EUR.
Each taxpayer who generates an income from a retirement pension has the right to obtain an annual tax credit that amounts to 300 EUR.
Each taxpayer who generates a commercial gain or a profit as an independent has the right to obtain an annual tax credit that amounts to 300 EUR.
Losses can be forwarded undefinitely.
As per 2015 a new tax has been introduced “Impôt d'équilibrage budgétaire temporaire (IEBT)”. The IEBT is a temporary budget balancing tax and will be perceived on the same remuneration as the “contribution dépendance” and the rate is 0.5%.
Taxpayers are divided into three classes dependant on whether they are married, widowed or receiving a tax allowance for a child living in their household.
There is a graduated scale with 19 income bands, to each of which corresponds a rate of tax ranging from 0 to 40 %; application of the rates varies according to the class to which the taxpayer belongs.
For the first band from 0 to € 11,265, the rate is 0 %; for the second band from € 11,265 to € 13,173, the rate is 8 %. Thereafter the rate is 10 %, subsequently increasing by 2 % per band. For incomes between € 41,793 and € 100,000, the rate is 39%. For incomes exceeding € 100,000 there is a uniform rate of 40 %. This basic scale is adjusted periodically to variations in the weighted consumer price index.
Surcharges:To provide resources for the unemployment fund, the liability for personal income tax is increased by a “solidarity” surcharge of 7 % of the amount payable under the above rules. The personal income tax is increased by 9 % for taxable income exceeding 150,000€ (tax classes 1 and 1a), respectively 300,000€ (tax class 2).
Tax is payable annually on the basis of tax returns within one month after receipt of the tax assessment notice.
Tax is paid in quarterly instalments in advance and withheld at source on certain forms of income (income from employment, pensions and annuities, income from capital).
The advance payments and the tax withheld at source are deductible against final income tax liability.
Any overpayment of tax is refunded in some cases.
Tax withheld on wages and pensions is adjusted annually, when the tax is not calculated by assessment.
If tax is not paid on time, interest is charged at a rate of 0.6 % month.
Administration of direct taxes (tax collector's office).
Incomes of married couples are treated as a single income for tax purposes and tax due is determined by the “splitting” system.
In general the method of assessing and collecting the tax due is similar as for resident taxpayers except that only income accruing in Luxembourg is taxable. No deduction is made for certain special expenses or for extraordinary expenses except the case where the non resident taxpayer is taxable in the Grand Duchy on at least 90% of his total professional income.
For non-residents only, royalties derived from literary and artistic work and income derived from professional sports activities are subject to income tax collected at source (10% on the gross amount of the receipts or 11% if the debtor takes the tax liability).
Losses suffered by business firms, farmers, foresters or persons practising a liberal profession may be carried forward indefinitely, provided the persons running the enterprise or other persons involved keep regular accounts.