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Taxation

Luxembourg (City) - Taxation


Luxembourg has one of the highest personal taxation rates in Europe. All those resident in the country are subject to income tax (impôt sur le revenu) and VAT is added to most utilities and goods. For the purposes of taxation, an individual is considered to be a resident of Luxembourg if they have a home there for anything other than very short stays. Spending more than six months in the country during the tax year is considered to be residency.

The country has a number of tax treaties in place which can help prevent residents from paying tax on the same income in more than one country and these can be beneficial for expats as residents are expected to pay tax on all the money that they earn worldwide. This will ensure that those who have an income deriving from another country are not charged twice.

Residents are expected to pay tax (impôt) on a number of different types of income. These include income from a business, income derived from employment, income from pensions and investments, revenue gained from renting out property and income from the sale of property or other assets (impôts sur les plus-values). However, there are also many items of expenditure which are considered to be tax deductible (déductible des impôts). These include child tax credit (réduction fiscale), expenses associated with employment, interest on property loans and working unsociable hours.

There are different rates of income tax and the bracket you fall into will depend upon your family status. These can be as high as 38% and extra taxes of up to 2.5% are charged to fund unemployment benefits, although the rates can be lower if you have dependent children.

Those who receive dividends from shares will find that these are taxed before they are paid out at a rate of 15%. The same applies to those who have income from employment, although the rate of this tax will vary. When you first arrive in the country you should be issued with a tax card (fiche de retenue d’impôt) which contains your personal details and the details of any deductions that you are entitled to, such as dependent children. These details will be used to calculate the amount of tax payable and should be given to your employer, who is responsible for your tax deductions and taking into account any work related expenses which are tax deductible. The tax card also includes a form for notifying the tax office of any changes to your personal circumstances which may affect the amount you need to pay.

Income of any other type must be declared on a tax return which has to be submitted by the end of March in the year after the income was received. Those who are liable for tax payments can pay in four installments during March, June, September and December – each one is a quarter of the tax bill for the previous year.

VAT (TVA – taxe sur le valeur ajoutée) rates vary between 3 and 15% depending upon the service or goods provided. Inheritance tax (droits de succession) is also payable, although these vary depending upon the situation. Spouses who have no children can inherit without paying taxes. Those who do have children will pay a tax of 5%. Siblings can inherit at a tax rate of 6% and if inheriting from an aunt or uncle the rate is 9%, as it is for adopted children who inherit from parents. Inheriting from a great-aunt or uncle incurs a rate of 10% inheritance tax. Any other inheritance will incur a rate of 15%.

Completing a tax return (déclaration des revenues) in Luxembourg can be very complicated and most residents will engage the services of a professional accountant for this to make the whole process easier. The Ministry of Finance has a website which contains information on completing and filing a tax return and some of the information is provided in English as well as in local languages.

Luxembourg has a number of agreements in place with other countries for the exchange of income and tax information to ensure that residents are paying the correct amount of tax and are not being overcharged. Details of these are available on the Ministry of Finance website.


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Expat Health Insurance Partners


Bupa Global

At Bupa we have been helping individuals and families live longer, healthier, happier lives for over 60 years. We are trusted by expats in 190 different countries and have links with healthcare organisations throughout the world. So whether you're moving abroad for a change of career or a change of scene, with our international private health insurance you will always be in safe hands.

Cigna

Cigna has worked in international health insurance for more than 30 years. Today, Cigna has over 71 million customer relationships around the world. Looking after them is an international workforce of 31,000 people, plus a network of over 1 million hospitals, physicians, clinics and health and wellness specialists worldwide, meaning you have easy access to treatment.