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Luxembourg: Personal Taxation

Introduction

Luxembourg is a highly-taxed country and there are no special regimes for the foreign employees of 'offshore' companies. The main taxes are Income Tax, the Municipal Business Tax on Profits. VAT applies to most goods and services.

A 'crisis tax' of 0.8% on all salary and investment income was imposed from January 2011, and was due to be applied for two years to help maintain public debt at a manageable level. Further measures introduced from 2011 include:

  • An increase by 1% to the maximum tax rate from 38% to 39%;
  • A EUR300,000 ceiling on tax deductions for businesses electing to issue bonus payments or “golden handshakes”;
  • An increase the solidarity tax to 4% for households and from 4% to 5% for businesses.

Additionally, it was announced that Luxembourg’s government does not intend to raise tax thresholds with inflation.

The 'crisis tax' of 0.8% was abolished from the start of 2012 - one year earlier than initially planned.

 

 

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