Tax Number In Luxembourg: An Expats Guide
Embarking on the Luxembourg journey and feeling entangled in the web of tax formalities? Fear not!
This guide is your light in the financial fog, guiding you on the path to securing your all-important tax number.
Let’s unlock the door to financial tranquility in the Grand Duchy together!
The Most Progressed Taxation System In Europe
Before delving into the taxes for expats in Luxembourg, it is worth noting that this country’s personal income taxation system is one of the most sophisticated in Europe.
Income tax is imposed based on marital status and whether the payer is a resident or non-resident of this country.
The tax is then levied depending on specified brackets.
As a result, as a foreign citizen in Luxembourg, you must consider the following:
- whether you relocated here with your partner
- whether you are a resident or not
- your income in Luxembourg’s
The following taxes are levied on expats in Luxembourg:
- on the worldwide income if they are Luxembourg residents;
- on the income obtained in Luxembourg if they are non-residents.
If you want to apply for a residence permit in Luxembourg, please contact the law office. This will make determining your tax base easier.
Have You Just Moved To Luxembourg?
Tax may be deducted from your earnings as a foreign person in Luxembourg as soon as you begin receiving income.
Pay Tax!
With a few exceptions, Luxembourg taxes are the same for residents and non-residents.
If you have a residence in Luxembourg or have resided in Luxembourg for a period of six months or longer, you are considered a resident for tax purposes.
You can file an income tax return or the simplified tax equalization as a resident. You will be regarded as a non-resident if you do not have a registered address in Luxembourg.
Residents and non-residents both can file tax equalization forms if their income outside of Luxembourg does not exceed 25% of their total income.
Residents and non-residents are solely taxed on income earned in Luxembourg. The income earned outside of Luxembourg is used only to calculate the correct tax rate.
Luxembourg has tax arrangements with over 80 countries. These documents ensure that a worker’s salary is not taxed twice.
According to watchdogs, Luxembourg is one of 16 international tax havens. The Luxembourg Wealth Tax was abolished in 2006 for both residents and non-residents.
This is especially true for businesses, where the Luxembourg net worth tax is 0.5% of total actual net worth.
One of the reasons many businesses want to operate in Luxembourg is the relatively low net wealth tax. Furthermore, unlike most other EU countries, Luxembourg has a low inheritance tax.
It is based on the net valuation of the estate, which includes both immovable assets within the country and movable assets outside Luxembourg and elsewhere.
When it comes to inheritance tax, children take precedence: 50% of the net worth of the estate will belong to an only child, 66.6% to two children, and 75% to three children.
What Is The Luxembourg Tax-Free Threshold?
A tax-free threshold is the amount of income that can be earned in a country without paying taxes.
The tax-free level in Luxembourg is €11,265.
Basically, you can make up to €11,265 each year without paying tax.
How Much Tax Will I Have To Pay?
Luxembourg has a progressive income tax. This means that the more your income, the higher your Luxembourg income tax rate will be. As a result, your wage after tax in Luxembourg will be decided by the tax rate you pay.
Expat Taxes In Luxembourg
Luxembourg tax rates range from 0% to 42%, depending on your income. In general, your salary after tax in Luxembourg will be determined by how much you earn, as you will be taxed accordingly.
Any earnings earned up to €11,265 are tax-free. Anything over €200,004 is subject to a 42% tax.
Tax Rates To Be Paid
The table below depicts the entire progressive range of tax rates for Luxembourg in 2023. You must keep in mind that the tax is calculated progressively.
This means that if you have a yearly income of 14,000 euros, even though the corresponding percentage in the table is 9%, this percentage is not applied to the complete amount of 14,000 euros, but only to the range of income that falls within this level.
A table outlining Luxembourg’s personal income tax rates is given below.
| From EUR | To EUR | Tax rate (%) | Employment fund surcharge (%) | Effective tax rate (%) |
| 0 | 11,265 | 0 | 7 | 0 |
| 11,266 | 13,137 | 8 | 7 | 8.56 |
| 13,138 | 15,009 | 9 | 7 | 9.63 |
| 15,010 | 16,881 | 10 | 7 | 10.7 |
| 16,882 | 18,753 | 11 | 7 | 11.77 |
| 18,754 | 20,625 | 12 | 7 | 12.84 |
| 20,626 | 22,569 | 14 | 7 | 14.98 |
| 22,570 | 24,513 | 16 | 7 | 17.12 |
| 24,514 | 26,457 | 18 | 7 | 19.26 |
| 26,458 | 28,401 | 20 | 7 | 21.4 |
| 28,402 | 30,345 | 22 | 7 | 23.54 |
| 30,346 | 32,289 | 24 | 7 | 25.68 |
| 32,290 | 34,233 | 26 | 7 | 27.82 |
| 34,234 | 36,177 | 28 | 7 | 29.96 |
| 36,178 | 38,121 | 30 | 7 | 32.1 |
| 38,122 | 40,065 | 32 | 7 | 34.24 |
| 40,066 | 42,009 | 34 | 7 | 36.38 |
| 42,010 | 43,953 | 36 | 7 | 38.52 |
| 43,954 | 45,897 | 38 | 7 | 40.66 |
| 45,898 | 100,002 | 39 | 7 | 41.73 |
| 100,003 | 150,000 | 40 | 7 | 42.8 |
| 150,001 | 200,004 | 41 | 9 | 44.69 |
| Over 200,005 | 42 | 9 | 45.78 |
It is important to note two points regarding these calculations:
- The government’s website calculated changes by a few cents since the real calculation differs slightly, and the tax rate and the employment fund surcharge are calculated separately and rounded down before being combined to make the total tax.
- The calculation described above only considers the basic income tax and excludes any additional deductions, exemptions, or credits that may apply to an individual’s tax situation.
Expat Taxes In Luxembourg Vary By Tax Class
Personal income tax is levied in Luxembourg on earnings from job or self-employment. In the first situation, the employer will withhold the tax at the source, so there will be no need to worry about missing a payment.
Someone who is legitimate can enter the following tax classes:
- Single people, married couples who chose separate taxation, married non-residents
- Married couples who chose joint taxation
- Adults over the age of 65, and single parents who have minor children under their care
Widows, divorced and separated people, and civil partners shall be classified as married taxpayers for the first three years after attaining the status.
You may rely on local lawyers if you need help comprehending Luxembourg’s tax rules.
Non-Residents’ Tax Treatment In Luxembourg
When relocating to Luxembourg, foreign people have the option of remaining non-residents for tax reasons or enrolling with the Inland Revenue. Non-residents and Belgian nationals are also exempt from the rules.
Expats who are non-residents but earn more than 90% of their wages in Luxembourg or earn less than 13,000 euros outside the nation might choose to be considered as residents.
Making at least 50% of one’s earnings in Luxembourg can assist Belgian citizens in qualifying for tax residency treatment.
Luxembourg Has Enacted A New Tax Structure For Expats
The Luxembourg government updated the old tax structure for expats in 2021, giving it a more modern approach.
According to the legislation, expats can benefit from a tax exemption of up to 50% on income up to 30% of the yearly basic salary earned in the Grand Duchy.
This system requires a minimum annual salary of 100,000 euros, which is 50% higher than the previous scheme.
Other requirements for eligibility of the foreign citizen being a Luxembourg resident, or for cross-border commuters (this status is frequently met in the Grand Duchy) not living more than 150 km from the Luxembourg border. Furthermore, the employment must be skill-based.
When it comes to taxes in Luxembourg for expats, this plan offers various benefits, including the deduction of relocation fees, rent, utilities, and school fees for children.
Here are the major highlights of the tax rates that expats in Luxembourg must consider:
The minimum rate is 0% for yearly income less than 11,265 euros; the highest rate is 42% for annual income greater than 200,004 euros; and all employees receive an annual deduction of 540 euros for employment expenditures.
Filing A Luxembourg Income Tax Return
Residents and non-residents who are liable to Luxembourg personal income tax must file an income tax return.
This is accomplished by submitting Form 100.
To file a tax equalization (Lohnsteuerausgleich), residents must use form 163 RD, while non-residents must use form 163 NRD.
When Is The Tax Deadline In Luxembourg?
The fiscal year in Luxembourg is the same as the calendar year.
If you are required to file a tax return in Luxembourg, the deadline is always March 31. Otherwise, you have until December 31st of the following year.
If you owe money to the Luxembourgish tax authorities, you must file by this date. If you fail to file on time, you may be fined and penalized (more on this later).
What Happens If I Don’t File My Tax Return?
If you owe money to the Luxembourg tax authorities, you should complete your tax return and pay the outstanding amount as soon as possible.
This is due to the possibility of being fined or penalized for failing to file on time.
Beginning the first of the month after the payment’s due date, you can anticipate being fined 0.6% of the entire payment per month.
You can always ask for an extension to the initial deadline, which gives you four more months to file. After that period has passed, you will be charged the following rates:
- 1% each month for months 5 to 12
- 2% each month for one to three years
- After three years, the rate will be 6% per month eternally.
Earned Money Outside Of Luxembourg During The Year?
If you worked in Luxembourg for fewer than nine months, you must state on your tax return whether you earned money outside of Luxembourg.
When submitting your tax refund application, the Luxembourg tax office will ask you (or a tax agency like Taxback.com!) for this information, therefore it’s a good idea to outline it.
Taxes In Luxembourg For US Expats
Several thousand Americans are expected to dwell in Luxembourg. Living in Luxembourg is a great experience for a variety of reasons, including the friendliness of the residents, the attractive architecture, and the ease with which you may travel throughout Europe.
No matter where they live or how much they make, all US citizens and green card holders who earn at least $ 10,000 anywhere in the globe must submit a US federal tax return and pay taxes to the IRS.
The good news is that if you pay income tax in Luxembourg, there are several exceptions and privileges that prohibit you from paying tax to the IRS on the same income.
Tax Refunds In Luxembourg
There’s a good chance you’re due a Luxembourg tax refund. This is especially true if you overpaid your income taxes throughout the tax year. To file your tax return, you must use Form 100.
You may also use Taxback.com to request a Luxembourg tax refund!
Conclusion
So, the riddle of the Luxembourg tax number has been solved! We hope this guide has served as your financial compass, leading you seamlessly through the processes and paperwork.
Tax Triumph!
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