Investment income. Dividends received by a resident taxpayer from a resident or nonresident company are generally subject to personal income tax. A 50% exemption is granted for dividends received from any of the following:
• A fully taxable Luxembourg-resident company
• A taxable European Union (EU) resident company that is covered by the EU Parent-Subsidiary directive
• A taxable company resident in a country that has entered into a double tax treaty with Luxembourg and that is subject to comparable corporate taxation
With respect to the costs associated with the dividends eligible for the 50% exemption, a cut of 50% is also applied.
A 15% tax is withheld by a Luxembourg distributing company and can be either offset against Luxembourg tax or refunded under certain circumstances.
A final withholding tax of 20% is imposed on interest income paid by a paying agent established in Luxembourg to beneficial owners residing in Luxembourg. Interest income subject to this final withholding tax is no longer required to be reported into the annual tax return. The withholding tax is not considered a final withholding tax if the income derives from business assets (assets used in self-employment or business activities) of the investor rather than from private assets. In addition, the law states that interest received from certain savings deposits are not taxable if the amount received is under the threshold of EUR250 per person and per paying agent.
Alternatively, Luxembourg residents may opt for a final tax of 20% on eligible interest income received from paying agents located in either of the following jurisdictions:
• EU Member States
• European Economic Area (EEA) states
The option for a final withholding tax of 20% is applicable to interest income (deriving from private assets only) as defined by Luxembourg law. The annual tax-free ceiling of EUR250 per individual and per paying agent also applies to eligible interest income paid outside Luxembourg. The request for the application of the 20% final withholding tax must be done by filing a specific form before 31 December of the year following the year of payment.
If the taxpayer is a Luxembourg resident, income excluded from the 20% final withholding tax must be reported in the annual tax return and is taxed at the progressive rates.
A lump-sum deduction of EUR25 is granted for expenses related to both dividend and interest income (excluded from the 20% final withholding tax), unless actual expenses are higher. This lump-sum deduction is EUR50 for spouses/partners subject to joint taxation. In addition, both dividend and interest income (excluded from the 20% final withholding tax) are exempt up to EUR1,500 (the exemption is doubled for spouses/ partners jointly taxable). Expense deductions cannot result in a
loss that would offset or decrease other categories of income, except in certain limited cases.
Royalties and income from the rental of real estate are aggregated with other income and taxed at the rates set forth in Rates
Nonresidents are subject to the 15% withholding tax on dividends received from Luxembourg companies. However, if an applicable double tax treaty provides a lower tax rate, nonresidents can claim a refund of the excess tax withheld. Most of the double tax treaties entered into by Luxembourg provide for a maximum tax rate of 15% on gross dividends.
Nonresidents are not subject to withholding tax on royalties.
Directors’ fees. Payments to managing directors of Luxembourg companies linked to their day-to-day management activities are regarded as employment income and are taxed at the rates set forth in Rates. In contrast, directors’ fees are subject to withholding tax at a rate of 20%. If the gross amount of directors’ fees received by a nonresident director is lower than EUR100,000 per year, the filing of a Luxembourg income tax return is not mandatory; as a result, the 20% withholding tax is considered as a final tax (provided that there is no other Luxembourg-sourced income). However, the nonresident director may file a tax return at his or her discretion. Individuals who are required to or elect to file an income tax return may credit the 20% withholding tax against their Luxembourg tax liability.
If the company bears (pays itself) the tax on directors’ fees, the tax rate applicable to the net fees is 25%.
Special tax regime for expatriate highly skilled employees. A beneficial income tax regime has been introduced for expatriate highly skilled employees. This regime provides tax relief for certain costs linked to expatriation and is subject to several conditions to be met from both the employee’s and the employer’s side. The tax regime, which entered into force on 1 January 2011 was subject to successive amendments (on 1 January 2021 and on 1 January 2023). One of the major change effective since 1 January 2023 is the decrease of the salary threshold to trigger the eligibility for the regime, from EUR100,000 to EUR75,000. This regime applies to employees sent temporarily to work in Luxembourg on an assignment between intragroup entities and to employees directly recruited from abroad by a Luxembourg company. Both the employer and employee need to meet certain conditions to be eligible for this expatriate regime.
Under certain conditions, various costs directly related to the expatriation are exempt from tax, such as the following:
• Moving costs (transportation of goods, transfer travel expenses, furnishing costs and similar expenses).
• Costs related to housing in Luxembourg (rent and utilities if the former accommodation is maintained in the home country or the housing differential if the former accommodation is not maintained), and home-leave trip and tax-equalization costs. The tax exemption is limited to the lesser of EUR50,000 per year (EUR80,000 for married couples or partners sharing accommodation) or 30% of the fixed total annual remuneration.
In addition, interest on loans contracted to purchase owneroccupied housing is deductible up to a ceiling that decreases with the length of time the housing is occupied, as indicated in the following table. Year of occupation
After 31 December 2017 3,000
Between 31 December 2012 and 1 January 2018 2,250 Before 1 January 2013 1,500
* This is the ceiling for each member of the household.
Personal deductions and allowances. A deduction may be claimed for the following extraordinary expenses if specified conditions are fulfilled:
• Expenses for hospitalization that are not covered by a sickness fund
• Maintenance of close relatives
• Expenses related to handicapped persons
• Childcare expenses
• Employment of domestic staff
Business deductions. In general, all expenses for business or professional activities are deductible, such as the following:
• Costs of material and stock
• Staff costs, certain taxes, rental and leasing expenses, finance charges, self-employed social security contributions, and all general and administrative expenses
• Depreciation of fixed assets
• Provisions for identified losses and expenses
• Loss carryforwards (within limits)
Rates. Tax rates are progressive with a maximum rate of 45.78% for 2024 (maximum 9% unemployment fund contribution included). The marginal tax rate is 45.78% for income exceeding EUR220,788 for taxpayers in Tax Class 1 (single individuals and married couples taxed separately) and Tax Class 1a (single, separated or divorced individuals with children) and EUR441,576 for taxpayers in Tax Class 2 (married couples or partners jointly taxable).
The following table sets forth the average income tax rates for 2024, taking into account the applicable unemployment fund contribution.
In general, nonresidents are subject to the above rates. For nonresidents, a minimum tax applies to all income other than employment or pension income.
Business profits tax. Net business profit is subject to income tax and municipal business tax.
Certain tax credits, such as the investment tax credit, may reduce the final tax due.
In addition, privately held businesses are subject to municipal business tax on trade profit as computed for income tax purposes, subject to various adjustments, less a standard exemption of EUR40,000. The rate varies depending on the municipality, but generally is approximately 7.5% (6.75% for Luxembourg City).
Nonresidents who carry on business through a permanent establishment in Luxembourg are taxed at the same rates as residents.
Relief for losses. Trading losses, adjusted for tax purposes, incurred in or after 1991 may be carried forward without a time limitation. For losses incurred in financial years closing after 31 December 2016, the use of loss carryforwards is limited to 17 years. The oldest losses are deemed to be used first. Losses may not be carried back.
Losses derived from investments in securities may only offset positive investment income, and not positive income from other categories. However, an exception to this rule may apply if the taxpayer holds a significant shareholding in a company and derives his or her main professional earnings from activities in that company.
B. Other taxes
Net worth tax. No wealth tax exists for resident and nonresident individuals.
Inheritance and gift taxes. The tax base for inheritance tax is the market value at the time of death of the entire net estate inherited from a person domiciled in Luxembourg. Exemptions apply to real estate located abroad and, under certain conditions, to movable assets held outside Luxembourg. If the decedent was a nonresident at the time of his or her death, death tax is levied only on real estate located in Luxembourg.
The inheritance tax rates range from 0% to 48%. The rate applicable to heirs in direct line (for example, a son or daughter, or grandson or granddaughter) is 0%. A 0% rate also applies to any inheritance between spouses or registered partners of more than three years. Death taxes are imposed on real estate located in Luxembourg that is left by a person who was not an inhabitant of Luxembourg, even a person in direct line, at rates that range from 2% to 48%.
Gifts and donations that are required to be registered with the Administration de l’Enregistrement (and therefore subject to registration tax) are subject to gift tax. Gift tax is payable by the resident or nonresident donee on the gross market value of the assets received. The rates range from 1.8% to 14.4%, depending on the relationship between the donor and the donee.
Greece Norway United
Guernsey
Hong Kong
Panama Kingdom
Poland
United States
Hungary Portugal Uruguay
Iceland
Qatar
Uzbekistan
India Romania Vietnam
Indonesia
Russian Federation
* Mongolia denounced the double tax treaty, which no longer applies, effective from 1 January 2014.
Luxembourg has signed tax treaties with Albania, Argentina, Cape Verde, Colombia, Ghana, Kuwait, Montenegro, Oman and Rwanda, but these treaties have not yet been ratified.
Tax treaty negotiations with Australia, Chile, Egypt, Kyrgyzstan, Mali, New Zealand, and Pakistan have been announced.
Residents deriving income in non-treaty countries are in principle entitled to a credit for foreign taxes paid, up to the amount of tax imposed by Luxembourg on the foreign-source income.
Frontier workers. Historically, Luxembourg had entered into Memoranda of Understanding with Belgium and Germany with respect to frontier workers and signed a new comprehensive double tax treaty with France, allowing the frontier workers in the past to work, respectively, 19 days in Germany, 20 days in Belgium and 29 days in France during a calendar year outside Luxembourg without triggering taxation in their country of residency. As a result of the COVID-19 pandemic, Luxembourg agreed with Belgium, France and Germany to increase and align the number of days of teleworking allowed in the residency country to 34 days. The agreement between Luxembourg and France was retroactively effective as of 1 January 2023, and as of 1 January 2022 for Belgium. The 34-day rule is applicable as of 1 January 2024 as per the agreement between Germany and Luxembourg.
F. Temporary visas
Luxembourg offers temporary transit visas and short-stay visas (visa de court séjour). A transit visa is valid for travelers passing through Luxembourg. A short-stay visa is valid for persons (employed and self-employed) who stay in Luxembourg for a short period and do not derive income in Luxembourg, such as tourists, students enrolled in training courses in Luxembourg for less than three months and people on business trips.
The short-stay visa can be issued for a single entry or multiple entries. In the event of multiple entries, the total duration of the stay cannot exceed 90 days over a period of six months. The maximum period for a visa during which authorized visits can be made is one year.
The renewal of visas depends on the situation of the visa holder. In general, renewals are granted for one year.
G. Residence authorizations
The law on the free movement of EU citizens and on immigration policies, dated 29 August 2008 and subsequently amended, covers residence authorizations, which are work and stay permits for citizens outside the EU, EEA or Switzerland.
Under Luxembourg law, nationals of EU Member States, EEA states (Iceland, Liechtenstein and Norway) or Switzerland do not need a residence authorization to perform their professional activities in Luxembourg.
Residence authorizations are not required for spouses (regardless of their nationality) of EEA or Swiss citizens who reside in Luxembourg. This exemption also applies to spouses (regardless of their nationality) of Luxembourg citizens resident in Luxembourg.
Luxembourg immigration requirements vary depending on the citizenship of the individuals and the length of their stay.
Since 1 January 2021, UK nationals establishing residence in Luxembourg require a residence authorization.
Citizens of the EU, EEA or Switzerland
Right to move and reside up to three months. Citizens of the EU, EEA or Switzerland and their family members (regardless of their nationality) may move to and reside in Luxembourg for a period of up to three months without any conditions other than the requirement to hold a valid identity card or passport. An entry visa may be requested for family members who are themselves third-country nationals.
Right of residence for more than three months. Citizens of the EU, EEA or Switzerland have the right of residence in Luxembourg for a period of more than three months if they satisfy either of the following conditions:
• They are workers or self-employed persons.
• They can provide proof of sufficient resources for themselves and their family members, and they have valid health insurance.
If the planned period of residence in Luxembourg exceeds three months, the individuals concerned and their family members must register with the communal administration within three months after the date of arrival. A registration certificate is then delivered. Family members who are themselves third-country nationals must request a residence card from the municipality within three months after the date of arrival. The residence card of a family member is valid for five years.
After a continuous period of five years of legal residence in Luxembourg, citizens of the EU, EEA or Switzerland and their family members (regardless of their nationality) have the right of permanent residence (on request).
Third-country nationals
Conditions of entry, exit and residence up to three months. In principle, the third-country national must personally request the residence authorization and submit it to the competent authorities before entry into Luxembourg.
Third-country nationals may enter and reside in Luxembourg up to three months within a six-month period provided that a valid passport and visa (if applicable), sufficient resources and health insurance are presented. These nationals must declare their entry into Luxembourg with the communal administration within three days after the date of arrival (no declaration is necessary for tourists residing in hotels). If they want to exercise employment or
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Self-employed persons. Residence authorizations for a maximum period of three years (renewable) are granted to third-country self-employed persons if the following conditions are satisfied:
• They have the professional qualifications and hold a business license or any adequate professional authorization.
• They have sufficient resources and accommodation.
• The exercise of the independent activity benefits the economic interests of Luxembourg.
Other categories of residence authorization. Under certain conditions, residence authorizations are granted to, among others, the following persons:
• Third-country students
• Exchange students
• Unremunerated trainees
• Researchers
• Sportspersons
• Inactive persons
• Other persons for exceptional reasons (for example, medical treatments)
EC long-term resident status. Third-country nationals can obtain long-term resident status if they have five years of legal and continuous residence in Luxembourg before the submission of the relevant application. The EC long-term resident status is valid for a period of five years, and is automatically renewed on request.
Steps for obtaining residence authorizations
General. When hiring foreign and Luxembourg wage earners, employers must notify the Labor Administration (Agence pour le développement de l’Emploi, or ADEM) of all job vacancies within three working days before publication in the press. A special form, called “Job Vacancy Declaration” (“Déclaration de Poste Vacant”), is used to notify the ADEM of the vacancy. This step is not required in some situations (for example, highly skilled workers as well as high-demand professions).
After the decision to hire a person is made, certain administrative formalities must be fulfilled, or a residence authorization must be obtained, depending on the citizenship of the prospective employee, as outlined above.
Employers must inform the Social Security Registration Authority (Centre Commun de la Sécurité Sociale, or CCSS), by use of the “Entry Declaration” (“Déclaration d’Entrée”) form, to have an employee affiliated with social security.
Frontier workers. Frontier workers include any employed or selfemployed person who pursues his or her occupation in one EU Member State and who resides in another Member State to which he or she returns daily or at least once a week.
Frontier workers are not required to comply with any special formalities.
Application for a residence authorization. Before arrival, the foreign worker must submit a written request for a temporary
residence authorization to the Ministry of Immigration. The request must be sent together with a certified copy of the passport, birth certificate, police record extract, curriculum vitae, diplomas, employment contract and a motivation letter (letter providing information on the foreign worker’s motivation to work for a certain employer).
Within 90 days after the date the temporary residence authorization (autorisation de séjour) is issued by the Ministry of Immigration, the foreign worker must either request a visa (if applicable) or enter Luxembourg (if a visa is not required). The entry must be declared with the communal administration within three days after the date of arrival.
Within three months after the date of arrival, the foreign worker must submit a form to obtain a definitive residence authorization called “Issuing Request for a Residence Authorization” (“Demande en délivrance d’un titre de séjour”). The form must be sent to the Ministry of Immigration together with the following:
• A certified copy of the temporary residence authorization
• An arrival declaration to the communal administration
• A medical certificate issued by a Luxembourg doctor and a tuberculosis screening
• Proof of suitable accommodation in Luxembourg
• A recent photo (biometrical)
• Proof of payment of a EUR80 stamp duty, which must be wired to the bank account of the Ministry of Immigration
The validity period of the definitive residence authorization is one year from the date of registration with the municipality. Two months before the expiration of the authorization, the Ministry of Immigration notifies by letter the foreign worker of the formalities to be followed to obtain a renewal of the authorization. The validity period for the first renewal is two years, while the validity period for subsequent renewals is three years.
H. Family and personal considerations
Family members. An expatriate worker may be accompanied to Luxembourg by his or her spouse and children. The application for the stay permit for each family member is submitted to the Ministry of Justice in Luxembourg jointly with the expatriate worker’s request.
Family members who are EEA or Swiss nationals need only request a registration certificate.
Foreigners’ identity cards are required for spouses and any children older than 15 years of age.
Effective from 1 September 2023, family members of thirdcountry nationals holding Luxembourg residence permits based on family reunification are now allowed to work in Luxembourg immediately on arrival, granting them unrestricted access to the labor market.
Children accompanying an expatriate worker to Luxembourg may attend any school in Luxembourg.
For some permits, a stay permit for family members can be requested only after a waiting period.