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Taxation in Luxembourg

Taxation in Luxembourg

Updated on Tuesday 10th January 2017

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Taxation-in-LuxembourgThe Luxembourg taxation system is made of several taxes which are imposed to tax residents in the Grand Duchy. The term tax residents comprises both natural persons and companies in Luxembourg which are taxed on their worldwide incomes. Foreign individuals and companies carrying out activities which generate an income will be taxed only on the income accrued in Luxembourg.

The following categories of income are taxed in Luxembourg:

  • -          business income;
  • -          income derived from agriculture;
  • -          employment income;
  • -          income for carrying out activities as sole traders;
  • -          income from pensions;
  • -          income generated by investments;
  • -          income derived from the rental of property;
  • -          other incomes, such which capital gains.

Our lawyers in Luxembourg can offer more information on the tax legislation applicable in the Grand Duchy.

The personal income tax in Luxembourg

One of the most important direct taxes applicable in Luxembourg is the personal income tax which is levied on individuals. Luxembourg residents are assessed and taxed progressively based on three classes, which are:

  • -          class 1 applicable to single individuals;
  • -          class 2 which applies to married and civil partners;
  • -          class 1a which applies to pension beneficiaries who must be at least 65 years old and to single individuals with children.

The tax is levied on a progressive basis, as mentioned above, with the lowest percentage of 8 and the maximum of 40. An additional solidarity surcharge of 7 also applies.

Taxation of companies in Luxembourg

Companies registered in Luxembourg and foreign companies operating here will applied the corporate income tax at two different rates. Companies with business profits below 15,000 euros will be levied a 20% tax rate, while companies with profits above this amount will taxed at a 21% rate.

Partnerships will not be taxed as companies in Luxembourg, as the partners will be taxed individually and the personal income tax will apply. The 7% solidarity surcharge also applies to companies in Luxembourg. An additional tax applicable to companies is the municipal business tax which is set at various rates in every city.

For full information on the taxation system in the Grand Duchy, please contact our law firm in Luxembourg.

 

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