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Tax rates in Luxembourg

Tax Rates

Consumption Taxes

Nature of the Tax
VAT (Value-Added Tax)
Tax Rate
17%
Reduced Tax Rate
A 3% rate applies to food for human consumption, excluding alcohol; agricultural products; books, newspapers and periodicals; shoes and clothes for children under age 14; sale of domestic accommodation; pharmaceutical products; restaurant services, excluding alcohol; water; transport of persons; admission to cultural events.
An 8% rate applies to the supply of gas and electricity, bikes, hairdressing, cleaning of private accommodation, plants and other floriculture products.
A 14% rate applies to wine of grapes with a concentration of alcohol up to 13 grades; solid mineral combustibles, mineral oil and wood used as fuel; advertising brochures and other prints; steam, heating and cooling; custody and management of securities; management of credits and credit guarantees by an entity other than the entity that granted the credit.
Some items are exempt from VAT, including real estate transactions, supplies of postage and fiscal stamps at face value, services of doctors and dentists, finance, insurance, cultural and sporting services, welfare services, education.
Other Consumption Taxes

Excise duties are levied on certain products, notably on wine and spirit, tobacco, electricity, and mineral oils. More detailed information on excise duties is available on the European Commission website.
A CO2 tax also applies.

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Corporate Taxes

Company Tax
Tax Rate For Foreign Companies
Resident entities are taxed on their worldwide income, whereas non-residents are only subject to tax on Luxembourg-source income.
Luxembourg branches are taxed in the same way as companies.
Capital Gains Taxation
Capital gains and losses are treated as ordinary income and are subject to corporate tax. The taxation of gains on certain fixed assets could be deferred where the proceeds are used to acquire replacement items.
Capital gains from the sale of shares may be exempt from tax if the payee maintains or undertakes to maintain their participation, directly or indirectly, for an uninterrupted period of at least 12 months and that the participation does not fall below 10% or a purchase price of EUR 6 million during this period.
Main Allowable Deductions and Tax Credits
Depreciation of tangible and intangible assets is tax-deductible. Goodwill can be amortised over its useful life, or if it cannot be measured otherwise, the amortisation period is limited to ten years.
Start-up expenses can be charged directly to the profit and loss account of the year in which they are incurred, or amortised over a period of five years.
Interest charges are deductible as long as they are consistent with the arm's-length principle. Bad debts are generally deductible.
Donations to charitable organisations are deductible up to 20% of net income or EUR 1 million (the minimum amount being EUR 120). The excess amount of donation can be deducted over two years.
Compensation payments and severance pay are deductible up to EUR 300,000.
Fines and penalties are not deductible. Taxes, with the exception of corporation tax, municipal tax and wealth tax are generally deductible.
Tax losses incurred through the years ending on 31 December 2016 may be carried forward indefinitely. Losses incurred after this date may be carried forward up to 17 years. The carryback of losses is not permitted.
Payments to foreign subsidiaries (royalties, management fees, interest paid by a Luxembourg company to foreign subsidiaries) are deductible as long as they respect the arm's-length principle. Interest or royalties due to related parties as of 1 March 2021 are not tax deductible if their recipients are corporate entities established in countries that are considered 'non-cooperative' for tax purposes (limitations apply).
Other Corporate Taxes
Luxembourg resident companies and subsidiaries of foreign companies are subject to wealth tax. The rate is 0.5% for a taxable base up to EUR 500 million. For a taxable base exceeding EUR 500 million, companies are required to pay a lump-sum fee of EUR 2.5 million and 0.05% of the tax base in excess of EUR 500 million, without any limit. Companies with their head office or central office of administration in Luxembourg are subject to the minimum wealth tax (with amounts varying between EUR 535 and EUR 32,100 according to the total gross assets).
A subscription tax is levied on transferable securities (a registration fee that would give rise to the transfer of securities). The rate is 0.05% for mutual funds based on net assets at the end of the quarter. The rate is reduced to 0.01% for specialised investment funds and reserved alternative investment funds. Graduated rate reductions apply for funds that invest in "sustainable" investments.
Certain deeds (establishment, amendment of the articles of association, transfer of seat to Luxembourg) give rise to a lump-sum registration fee of EUR 75. A proportional fee is also payable if the deed involves a contribution of immovable property or a contribution of movable assets against payment.
The sale or transfer of real estate is subject to a registration fee of 7%. A municipal surcharge of 3% applies to real estate transfers in the City of Luxembourg.
The contribution of real estate in exchange for securities is subject to a registration fee of 1.1%. A municipal surcharge of 0.3% applies to real estate transfers in the City of Luxembourg.
An annual real estate tax is levied by municipalities at rates varying between 0.7% and 1% of the unitary value of the property (and is multiplied by a coefficient based on the type of property and municipality - the coefficient is 750% for commercial property in Luxembourg City).
As of 2021, a new Real Estate Levy ("prélèvement immobilier") applies to certain investment fund vehicles, at a rate of 20%.
The municipal business tax on income is levied at rates between 6.75% and 10.5%, depending on the municipality (calculated from the multiplication of the tax base by the municipal rate).
The rates of social security contributions paid by the employer vary between 12.29% and 14.92% and are capped at an annual ceiling of EUR 135,417.24 for 2022.
Other Domestic Resources
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Luxembourg OECD United States Germany
Number of Payments of Taxes per Year 23.0 10.1 10.6 9.0
Time Taken For Administrative Formalities (Hours) 55.0 163.6 175.0 218.0
Total Share of Taxes (% of Profit) 20.4 41.6 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Individual tax rate Progressive rate from 0% to 42% (effective tax liabilities vary depending on the marital status of the taxpayer: single taxpayer, married our civil partners, single persons with children or senior citizens)
EUR 0 - 11,265 0%
EUR 11,265 - 13,137 8%
EUR 13,137 - 15,009 9%
EUR 15,009 - 16,881 10%
EUR 16,881 - 18,753 11%
EUR 18,753 - 20,652 12%
EUR 20,652 - 22,569 14%
EUR 22,569 - 24,513 16%
EUR 24,513 - 26,457 18%
EUR 26,457 - 28,401 20%
EUR 28,401 - 30,345 22%
EUR 30,345 - 32,289 24%
EUR 32,289 - 34,233 26%
EUR 34,233 - 36,177 28%
EUR 36,177 - 38,121 30%
EUR 38,121 - 40,065 32%
EUR 40,065 - 42,009 34%
EUR 42,009 - 43,953 36%
EUR 43,953- 45,897 38%
EUR 45,897- 100,002 39%
EUR 100,002 - 150,000 40%
EUR 150,000 - 200,004 41%
More than EUR 200,004 42%
Solidarity Surtax A solidarity tax of 7% of taxes (9% for single taxpayers earning more than EUR 150,000)
Dependency contribution 1.4%
Allowable Deductions and Tax Credits
Subject to limitations, deductions are permitted for insurance premiums for life, accident, sickness (up to EUR 672 per person); alimonies (up to EUR 24,000) and annuities; childcare, kindergarten and housekeeping cost; charitable contributions (up to the lower of EUR 1 million or 20% of taxable income); interest on personal and mortgage loans, etc. Commuting expenses can be deducted up to EUR 2,574 per year. If the employer subscribes to a supplementary pension scheme for employees and the employees pay an additional personal contribution, the latter is deductible from taxable income up to a maximum of EUR 1,200. Childcare or domestic service costs are deductible up to a maximum of EUR 5,400.
Each employee receives an annual flat-rate allowance of EUR 480 for expenses related directly to their job. If the business expenses exceed the annual flat-rate allowance of EUR 480, the employee may deduct the actual amount of his/her expenses.
Special Expatriate Tax Regime
Non-residents are only taxed on their Luxembourg-source income. Non-residents can deduct only expenses related to income subject to Luxembourg taxation, and they may also deduct their social security contributions paid in Luxembourg and the lump-sum standard deduction of EUR 480 (there is an option to be treated as tax-resident when 90% of the individual's worldwide income is taxable in Luxembourg or when the total income earned outside the country is below EUR 13,000).
Qualifying international employees, recruited or assigned to work in Luxembourg, can benefit from a special tax regime that provides tax exemptions for certain benefits. Conditions apply (minimum 5 years of seniority in the international group/sector concerned, minimum yearly salary of EUR 100,000, etc.).

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of countries that have a tax agreement with Luxembourg
Withholding Taxes
Dividends: 0 (paid to a qualifying company under the EU parent-subsidiary directive)/15%; Interest: 0%/20% (interest paid by a paying agent based in Luxembourg to Luxembourg tax resident individual); Royalites: 0%

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Latest Update: July 2022