Important: this is not tax advice

NestFainder does not provide tax or legal advice. Everything here is general information to help you orient yourself — not advice for your personal situation.
All information is compiled only from publicly available sources: official government publications and the Big Four accounting firms. You can find the specific sources in the breakdown below.
This content is generated with the help of AI. AI can make mistakes, be out of date, or misread the law.
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Tax at a glance

The essentials for people moving to Luxembourg.

What gets taxed?: Worldwide income
Resident after: 183 days
Your foreign income: Taxed
Foreign investment gains: Taxed
Exit tax when you leave: No
Wealth tax: No
Double-tax treaties: 86 countries
Special expat programs: 1 available
Crypto gains: Tax-free after 6 mo
Foreign-company rules: Yes
Social security (you): ~12.95%
Health insurance: Required

Documented from official and expert sourcesSee full breakdown & sources

Tax Information in Luxembourg

Understanding the tax system is crucial for financial planning when considering Luxembourg. This overview covers income tax, corporate tax, VAT/sales tax, and overall tax burden to help you evaluate the fiscal landscape and its impact on your finances.

Income Tax

Luxembourg:0% - 42%

Europe:Varied

0510

Moderate

Luxembourg employs a progressive personal income tax system with rates starting at 0% for income up to €13,320 (single filer, 2025) and reaching a top marginal rate of 42% above €220,068, plus a 9% solidarity surcharge on income over €150,000 (effective top ~45.8%). Residents are taxed on worldwide income, non-residents on Luxembourg-sourced income. Tax classes (1, 1a, 2) provide family-based relief, transitioning to a single class (Tarif U) from 2028 for individual taxation. Deductions include pension contributions (up to €4,500 from 2026), child credits, and new €9,000 allowance for extended working life. Social security contributions are ~11.05-14.25% employee share. No special expatriate regimes noted.

Corporate Tax

Luxembourg:24.94% (16-17% in reduced regime)

Europe:Varied

0510

Moderate

The standard corporate income tax rate in Luxembourg is 24.94% for 2026 (16% CIT + 7% solidarity surcharge + 1.4% municipal business tax in Luxembourg City), among higher in EU but competitive with IP box (effective ~5.2%) and R&D super-deductions. Reduced rates apply: 15% CIT (no surcharge) for profits <€350k and capital <€300k. New 2026 startup tax credit for investments in eligible young companies (<5 years, <50 employees, <€10M turnover). No special economic zones, but fund regimes and carried interest overhaul enhance attractiveness. Effective rates often lower due to incentives; Pillar Two 15% minimum applies to large MNEs.

VAT/Sales Tax

Luxembourg:17% (8%, 3%, 0% reduced)

Europe:Varied

0510

Very Poor

Luxembourg's standard VAT rate is 17%, the lowest in the EU, with reduced rates of 8% (e.g., restaurants, wine), 3% (essentials like food, books, medicines, hotels), and 0% for exports, intra-EU supplies, and certain international transport. Super-reduced rates absent. VAT is included in displayed prices for consumers. This low standard rate significantly eases consumer tax burden compared to EU average of ~21%, making it highly favorable.

Overall Tax Burden

Luxembourg:~39% of GDP

Europe:Varied

0510

Moderate

Luxembourg's overall tax burden is moderate-high with tax-to-GDP ratio around 39% (OECD data), above global averages but typical for high-income EU peers like Germany (39%). OECD tax wedge for single average earner ~38%, combining PIT, SSC (~25% total), and low VAT. Favorable for businesses/funds despite moderate CIT; strong public services (healthcare, pensions, infrastructure) justify load. Recent reforms (single tax class 2028, startup credits, pension boosts) aim to enhance equity and competitiveness regionally.

Expat Tax Setup in Luxembourg

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Luxembourg operates a worldwide income tax system for its residents, with progressive state income tax rates ranging from 0% to 42%, plus a solidarity surcharge of 7% (9% above certain income thresholds), giving an effective top marginal rate slightly above 45% when the surcharge is included.[2][5] Tax residency is established through either having a domicile (permanent home) in the country or by being physically present for more than six months (over 183 days) within any 12‑month period. A key attraction for expatriates is the impatriate tax regime applicable to inbound employees, which grants favourable treatment for certain expatriation‑related expenses and allowances under conditions set by circular L.I.R. n°95/2, rather than a blanket 50% exemption on gross salary. Luxembourg does not levy a net wealth tax on individuals. Capital gains on non‑substantial portfolio shareholdings (less than 10%) are generally exempt if the assets are held for more than six months, which is advantageous for private investors.[2] While there is no general deemed‑disposal exit tax, specific 'safeguard' provisions can tax capital gains on substantial shareholdings realised within five years of departure by individuals who were long‑term residents. Social security contributions are mandatory and relatively high for both employees and the self‑employed, but the system is comprehensive. Overall, Luxembourg is a relatively high‑tax jurisdiction but offers significant benefits for highly skilled professionals and long‑term investors through its participation exemption rules, portfolio capital‑gain exemptions, and targeted expatriate regimes.

Foreign Income

Taxable

Capital Gains

Taxable

Tax Residency

183 days

Exit Tax

None

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Documented data & sources59/61 sourced · 82% avg confidence

Tax regime

Luxembourg Income Tax Law[1][2]Strong sources

Regime type

worldwide[1][2]Strong sources

Residency trigger (days)

183[1][2]Strong sources

Habitual abode test

Yes[1][2]Strong sources

Residency notes

[1][3]Strong sources

Tax residency in Luxembourg for individuals is determined by two main criteria: having a 'domicile' or a 'habitual abode' in the country. A domicile is defined as a permanent home available for the individual's use, which can include a rented apartment. The threshold is relatively low, and even using a Luxembourg address for official purposes can be a factor. A habitual abode is established by a continuous physical presence in Luxembourg for more than six months (183 days) in any 12-month period. If an individual meets the residency criteria of both Luxembourg and another country, tie-breaker rules in the relevant double taxation treaty will apply, typically looking at factors like the location of a permanent home, the center of vital interests (personal and economic ties), habitual abode, and finally, nationality.

Sources

1.
IndustryLegal 500 Country Comparative Guides 2025 - ATOZ Tax Advisers· atoz.lu
"A Luxembourg resident taxpayer is subject to income tax on the basis of their worldwide income, unless otherwise provided by double tax treaties."
2.
IndustryLuxembourg Tax Residency: Rules and Regulations on Taxation in ...· luxtoday.lu
"Residents of Luxembourg are taxed worldwide on their income."
3.
Industry[PDF] Notion of tax residence - Natural person - ING Luxembourg· ing.lu
"When a natural person may be considered as a resident of two States, the individual’s situation is determined as follows in the OECD Model Tax Convent"
4.
Big FourTaxation of individuals Luxembourg 2024· assets.kpmg.com
"Luxembourg tax residents are taxable on their worldwide income in Luxembourg (with treaty reliefs where applicable), while Luxembourg non-residents ar"
5.
Big FourPwC Tax Summaries - Luxembourg Individual Income Determination· taxsummaries.pwc.com
"Luxembourg resident individuals are subject to tax on their worldwide income."
6.
Big FourKPMG Luxembourg - Taxation of Individuals· kpmg.com
"Luxembourg resident individuals are subject to tax on their worldwide income."
7.
Big FourLuxembourg - Individual - Foreign tax relief and tax treaties· taxsummaries.pwc.com
"Foreign income received by residents that is subject to a tax equivalent to Luxembourg income tax and is not exempted by a DTT is granted a tax credit"
8.
IndustryWhat are the key tax considerations for private clients in Luxembourg· lexology.com
"Luxembourg tax-resident individuals are generally taxed on their worldwide income. This means that all income deriving from Luxembourg or from abroad "
9.
IndustryLuxembourg's double tax treaties network· pinsentmasons.com
"To mitigate the risks of double taxation for businesses, it has entered into comprehensive double tax treaties with over 80 jurisdictions."
10.
IndustryExit tax - Fiduciaire LPG· fiduciaire-lpg.lu
"Luxembourg tax residents deciding to leave Luxembourg remain subject to income tax in Luxembourg on the sales of shares of Luxembourg companies in whi"
11.
IndustryCrypto Tax in Luxembourg - Legislation & Tax Law· cms.law
"There is no specific Luxembourg legislation for the taxation of crypto-assets. Therefore the general tax rules and principles should apply."
12.
IndustryMoving from Luxembourg Tax Guide 2026: Departure Rules· countrytaxcalc.com
"For individuals: Luxembourg does not impose a broad exit tax on individual taxpayers departing Luxembourg. There is no deemed disposition of financial"
13.
IndustryHow do I register my arrival in Luxembourg?· justarrived.lu
"If you are leaving Luxembourg permanently, you must report your permanent departure to your last municipality of residence."
14.
IndustryCommune Deregistration in Luxembourg 2026: Notice of Departure and Population Office· flytorelocation.com
"Not informing the ACD | Continued unlimited tax liability, default tax assessments"
15.
IndustryDeclaring your residence – arrival, change of address and departure | Ville de Luxembourg· vdl.lu
"Any transfer of a person's usual place of residence to another country must be registered with the population office of the municipal office for their"
16.
IndustryNet wealth tax - Guichet.lu - Luxembourg· guichet.public.lu
"In 2006, net wealth tax was abolished for natural persons"
17.
IndustryBenefiting from the tax regime for highly skilled and qualified workers (impatriates) - Guichet.lu - Luxembourg· guichet.public.lu
"This is an exemption of 50 % of gross annual earnings (excluding exempt benefits), capped at EUR 400,000 (i.e. a maximum exemption of EUR 200,000). So"
18.
IndustryLuxembourg - Inpatriate tax regime amended to boost attractiveness for talent - BDO· bdo.global
"The employee must not have been a Luxembourg tax resident, not lived within 150km from the border, or been subject to Luxembourg income tax during the"
19.
IndustryUnderstanding Municipal Business Tax in Luxembourg· easybiz.lu
"The municipal business tax rate is not uniform throughout Luxembourg, as each municipality sets its own rate."
20.
Big FourPwC Tax Summaries - Luxembourg Anti-avoidance Rules· taxsummaries.pwc.com
"Luxembourg has implemented CFC rules in accordance with the EU Anti-Tax Avoidance Directive (ATAD)."
21.
Big FourEY Tax Alert - Implementation of ATAD I and ATAD II in Luxembourg· ey.com
"The Luxembourg law implementing ATAD I (the 'ATAD Law') was published on 21 December 2018 and applies as from 1 January 2019. It introduced, among oth"
22.
Big FourLuxembourg Tax Authority issues guidance on application of controlled foreign company rules in Luxembourg· taxnews.ey.com
"As a consequence, the reference CIT rate for comparison purposes for the tax year 2022 is 8.5% for taxable income exceeding €200,000."
23.
IndustryHow Luxembourg taxes cryptocurrency and NFTs | Simmons & Simmons· simmons-simmons.com
"In this case, the gain would be subject to the standard rates of individual income tax, up to a maximum of 45.78 per cent."
24.
IndustryLuxembourg Crypto Tax Guide 2026· kryptos.io
"If mining evolves into a commercial operation, it becomes taxable, and individuals must declare and pay taxes on the income generated from mining."
25.
IndustrySocial parameters - CCSS (Centre commun de la sécurité sociale) - Luxembourg· ccss.public.lu
"Maximum contribution threshold: 13.856,63 (monthly from 01.01.2024)"
26.
GovernmentTotalization Agreement with Luxembourg | International Programs | SSA· ssa.gov
"An agreement effective November 1, 1993, between the United States and Luxembourg improves Social Security protection for people who work or have work"
27.
IndustryLuxembourg health system information - WHO/Europe· eurohealthobservatory.who.int
"Luxembourg’s health system is a statutory health insurance (SHI) system, which consists of a single-payer, the National Health Insurance (Caisse Natio"

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Tax at a glance

Income Tax

Corporate Tax

VAT/Sales Tax

Overall Tax Burden

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For You in Luxembourg

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Sources

Income Tax

Corporate Tax

VAT/Sales Tax

Overall Tax Burden

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