Income taxes in Luxemburg

The Duchy of Luxemburg is the recognized centre of Europe famous for its high standard of living. To a greater extent it is ensured by the fiscal system of the country. That is why it is strongly recommended to carefully study which taxes are paid by individuals and enterprise entities in Luxemburg.

The taxation base is different for citizens and non-residents of the country. The former shall make payments from all the types of income they acquire irrespective of the source and location. While the latter shall pay deductions only with respect to the funds earned within the country.

The Duchy has a large number of agreements concluded to avoid double taxation that is quite advantageous and beneficial for entities that bear fiscal liabilities.

The reporting year coincides with the calendar year: declarations for the previous period shall be filed before January 1^st of the following period.

The income tax in Luxemburg is actually the basic payment charged from individuals. It is calculated using the progressive scale – the maximum rate amounts to 39%. The percentage value can be reduced by enabling the following:

• benefits and preferences for spouses;
• exemptions due to having children;
• deductions related to work activities and so on.

Wealth deductions are provided for individuals in case:

• their income exceeds Euro 150 000 per year – 41%;
• they gain more than Euro 200 000 for the reporting period – 42%.

In both cases the minimum income value exempt from recording is Euro 11 265.

There can be some other payments to be made in addition to the listed contributions to the budget:

• to the employment fund – 4%;
• for the bank deposits income – 20%;
• for dividends – 15%;
• on the real estate cost – 0.7-1%;
• in case of real estate sale – about 7% of the transaction
  

Spouses are entitled to file declarations both jointly and individually. Thus they get an opportunity to choose most beneficial version for them.

The main payment to be charged from companies is paid on income. Last year the rates were reduced and associated with the income level (in Euro):

• less than 25 000 – 15%;
• above 30 000 – 18%;
• from 25 000 to 30 000 – the fixed amount of Euro 3750 and 39% on the amount outside the stated 25 000.

For legal entities, other rates are applicable in Luxemburg – 26% considering the municipal business tax. Other companies pay this tax within the range of 6-12%. The percentage value depends on the city where the firm is located.

Additionally, business corporations shall pay the following taxes:

• wealth income (in case of 90% of financial assets) – Euro 4 815;
• tax on the net value of the property– 0.5%;
• capital gain tax – 15-18%;
• VAT – 17% (reduced taxes are also available 14%, 8%, 3%);
• taxation at source – 15%;
• stamp duty – up to 12%.

If you still have any questions on taxes in Luxemburg please contact our specialists. They will give you prompt advice free of charge.

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