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Luxembourg - Banking
The Euro can be divided into 100 cents, and is represented by the symbol €.
In 2013, the Europa series of Euro banknotes were put into circulation. The enhanced security features of the banknotes mean that forgeries should be easier to detect.
Euro banknotes are widely available in denominations of €5, €10, €20 and €50. Denominations of €100, €200 and €500 are also legal tender, but are unlikely to be issued by ATMs or used in retail outlets.
The €500 note is due to be discontinued in late 2018. UK banks stopped accepting them in 2010 after concerns that they were facilitating criminal activity, and a European Commission inquiry in 2016 concluded that concerns justified withdrawing the note.
Coins are issued for €1 and €2, as well as 1, 2, 5, 10, 20 and 50 cents. All Euro coins have a side showing which Eurozone country issued the coin, whilst the other side has a standard design regardless of the Eurozone country of origin.
ATMs are easily found in the city and towns centres in Luxembourg. Some charge for cash withdrawals, but the screen will tell you how much you are being charged before you proceed with the transaction.
All debit and credit cards will be issued with four-digit PINs, under the chip and pin system. This is normal for most countries across the world, except for those using debit and credit cards issued in the United States. If you are paying by card from any automated point, you will need to enter your PIN. A staffed pay point may allow a US customer to pay by chip and signature, but as this is done very rarely, the member of staff may be unaware of the procedure.
Credit cards issued in Luxembourg are usually Mastercard or Visa cards. They are widely accepted by retailers, food outlets and other businesses. You may occasionally find a small business which does not accept credit cards, or which imposes a minimum payment as a result of transactions charges.
American Express cards are frequently accepted by larger companies, but you should check before putting your card in the reader. Diners Club cards are not accepted at many locations in Luxembourg.
Between 1999 and 2011, Luxembourg operated a domestic electronic money scheme called MiniCash. You may occasionally see outdated references to the scheme, but like the Bancomat card scheme, it no longer exists.
If you are looking to open a bank account in Luxembourg, there is plenty of choice. At the end of 2017, there were 146 credit institutions registered to operate in Luxembourg, despite 26 banks having recently closed. Commercial banks and branches of international banks offer a wide range of retail and commercial services.
Luxembourg has high standards of regulation for its financial services industry. Banks are required to be alert to the risks of corruption, crime and money laundering. As a result, there will be thorough checks of your ID documents, address and income sources before you are allowed to open a bank account.
Banks charge for the transaction costs associated with each account. Some banks offer a set monthly fee, whilst others offer a range of costs for individual transactions. The account that is best for you will depend on your individual circumstances, including access to nearby ATM machines, bank branches, and the types of transactions that you typically generate through your bank account.
The hours of bank branches vary, depending on the bank and the branch location. Most branches open on weekdays at 9am, though some offer pre-arranged appointment times at 8.30am. Closing time is normally between 4-4.30pm, although pre-arranged appointments at some branches can be offered as late as 5.30pm.
Access to bank branches on Saturdays is limited; some close for the entire day and some offer a few hours in the morning. All branches will be closed on Sundays.
Electronic banking has become a normal feature of accounts in Luxembourg. There will be different procedures to generate banking processes online depending on the retail bank account you choose, but they are all aimed at stopping your money from being stolen by criminals online.
As online security increases, scammers now cold call householders with various stories, including claims to be calling from the bank, to try to persuade the account holder to make a transfer. Even experienced professionals can find themselves falling for these ploys. Many banks will not refund customers who unknowingly transfer funds to criminals.
Luxembourg is one of the 32 countries which form part of the Single Euro Payments Area (SEPA). Under this system, a bank payment in Euros from a Luxembourg bank account can be made to an account in a different SEPA country as though it is a domestic payment. Credit transfers, direct debits and payment cards are covered by the SEPA harmonised legal framework.
Since electronic payments including direct debits are so common, cheques are not used very much in Luxembourg. If shopping at a supermarket, take a €1 coin to use in a trolley, but most people will pay for their groceries using a debit or credit card.
If you are a resident in Luxembourg, you must pay your taxes there on all income, wherever it is derived from. Your individual circumstances determine whether you are classed as a resident for tax purposes. This includes where you ordinarily live, and whether you have been in the country for at least six months without any significant absences. If you live there for less than six months, you will only pay income tax on your earnings within Luxembourg. Income taxes are due for income earned in Luxembourg even if you live elsewhere.
Tax treaties mean that you will not pay income tax twice if you earn income abroad but are a taxpayer in Luxembourg, or vice versa.
If you are working for an employer in Luxembourg, your income tax and health insurance payments will be deducted at source. Although income tax is a progressive system as in the UK and US, where higher incomes gradually lead to higher rates of tax due, a different approach is used. Firstly, all taxpayers fall into classes according to whether they are single, married, have dependent children or are over the age of 65. Every small increase in income leads to a higher rate of tax, starting at eight percent for those earning more than €11,266 and up to 42 percent for those earning above €200,000 a year for the 2017 tax year. Married couples split their income in half, add it to their partner’s halved income, and pay tax at that income level. This is a much more sympathetic system for couples raising children without two full time incomes coming in. Compare this, for example, to the UK tax system, where in most cases the full timer pays full tax, even if their partner does not earn enough to reach the personal allowance at which tax deductions begin.
The tax year ends on the 31st of December each year. Anyone required to submit tax returns must do so by the following 31st of March, but if your employment is your only source of income and below €100,000 you may not be required to do so. Tax advice for uncomplicated circumstances can be readily found online, but if you have other assets and income then investment in personal tax advice would be worthwhile.
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