Luxembourg has a long lasting tradition of a great business center, with high financial competence. It has a very good geographic positioning, at the heart of Europe, a strong political stability, and has a very multicultural and qualified workforce. All these key factors have established Luxembourg as being a hub for international trade in the financial sector. The tax regime is appealing to foreign investors in Luxembourg. Our company formation agents in Luxembourg can assist you in registering for taxation in this country.

Income tax in Luxembourg

Any person known to be a resident of Luxembourg has to pay taxes on his worldwide income during the tax year. In Luxembourg, the tax year starts on January 1 and ends on December 31. When it comes to married couples, spouses are taxed jointly. If a person is fiscally domiciled in Luxembourg or if he has been resident of Luxembourg for more than six months per year, then he can be considered a resident for tax purposes. Luxembourg splits the income one generates in eight categories that added together over the year generate the total taxable income. The most important are:

commercial or business profits;
profits generated by agriculture and forestry;
profits derived from self-employed professionals;
net income from employment, pensions and/or annuities, investments or rental of property;
other net income (including capital gains).

There are cases in which withholding taxes are levied on some of the above mentioned incomes. When it comes to income generated from employment, pensions or savings and investments, they are taxed on a pay-as-you-earn system. There are incomes that must be declared in an annual tax return that must be submitted to the Luxembourg Tax Administration. If you plan to open a company in Luxembourg and you want to know more about the taxes in Luxembourg, our company formation team will help you with all the needed information. Our experienced personnel in setting up a company in Luxembourg can explain in detail the taxation system in Luxembourg.

Local and international investors can get in touch with our accounting firm in Luxembourg and discover the services they need. As such, one can ask for payroll, bookkeeping, support for tax registration, declaration of income, tax planning, audits, and many more. We have a certified team of accountants you can rely on. Moreover, you can also request advice for risk assessment and evaluation or financial planning.

The corporate income tax in Luxembourg

The corporate income tax in Luxembourg is calculated on the profit specified in the commercial balance sheet. The income is derived from a commercial activity, such as self-employment or partnership in one of the types of companies available in Luxembourg. Partners of such companies are taxed individually based on the share they have within the partnership. In Luxembourg, the rate of the corporate income tax rate is 20% and it applies to companies with profits below EUR 15,000. As for the 21% corporate income tax in Luxembourg, this is applicable to company profits exceeding EUR 15,000. Furthermore, Luxembourg applies a rate for the city of Luxembourg worth 6.75%.

Who needs to pay taxes in Luxembourg?

Natural persons and companies in Luxembourg, alongside foreign enterprises and citizens, are subject to taxation. The tax rates apply depending on generated profits. We can assist both local and foreign entrepreneurs to register their companies for taxation in Luxembourg. Our specialists in company formation in Luxembourg are at your disposal.

What is the VAT rate in Luxembourg?

The standard VAT rate in Luxembourg is set at 17% and it applies to most goods and services available for sale in this country. A lower VAT rate applies to beverages, oils, and fuels, and it is set at 14%. Food products, pharmaceutical products, clothes, and non-alcoholic beverages are subject to a 3% VAT rate while the supply of electricity and gas is subject to a 8% VAT rate. It is important to note that the international and intra-community transport of goods is exempt from VAT. The VAT registration for your company in Luxembourg can be made with complete support offered by one of our specialists.

Personal income tax rates in Luxembourg

Incomes registered by natural persons in Luxembourg are subject to taxation at progressive rates, as follows:

• 8% rate for incomes starting with EUR 11,266.
• 42% rate for incomes exceeding EUR 200,000.
• 0% rate applies under certain conditions.

Employees in Luxembourg can deduct EUR 540/year for professional expenses like company car, free accommodation, gifts, occupational pensions, overtime, and severance pay, to give a few examples. Those interested in more details about the taxation regime in Luxembourg should request our help. It is quite recommended to know the Luxembourg tax rate in detail before starting a business in the Grand Dutchy.

What is the solidarity surtax in Luxembourg?

Luxembourg imposes a solidarity tax of 7% rate on the corporate income tax. More details in this matter can be solicited from one of our specialists in Luxembourg tax rates.

Municipal business tax in Luxembourg

6.75% is the municipal tax imposed in Luxembourg City and it is imposed on companies with establishments here. One must note that each municipality imposes its own tax. Need more details about the Luxembourg tax havens? Feel free to solicit our help.

Tax minimization methods in Luxembourg

A series of tax minimization strategies can be adopted in a company in Luxembourg by entrepreneurs who want to cut the amount of taxes in the firm. Charitable donations, tax deduction on employee gifts, paying the credits and the subscriptions in advance, plus specific retirement plans might be ideal tax minimization solutions for a company in Luxembourg. Tax planning enters the attention of our team of specialists in Luxembourg who can help you cut the amount of taxes in the company you own, in agreement with the applicable laws regarding taxation. Our experts are at your disposal if interested in the Luxembourg tax rate.

Making investments in Luxembourg

It is a known fact that Luxembourg is one of the best financial destinations in the world and home to a large number of companies that activate in this important sector. The generous business market hosts a series of operational companies in the most important industries in Luxembourg. The tax regime, a skilled workforce, excellent transportation and logistics, the possibility of accessing foreign markets, and the ease of registering a company are only a few of the business advantages offered by Luxembourg to foreign entrepreneurs. Here are some interesting facts and figures that highlight the economy and the business direction in Luxembourg:

Around USD 128 billion was the total FDI stock registered in Luxembourg in 2019.
According to the 2020 Doing Business report issued by the World Bank, Luxembourg ranks 72nd out of 190 worldwide economies.
Around 50% of the total FDIs received by Luxembourg came from EU countries.
About 40-50% of the total FDIs in Luxembourg are directed to the financial and insurance sectors.

Choose our specialists in taxation in Luxembourg

Our team of agents has experience in a wide range of tax rates in Luxembourg and they can help both domestic and international entrepreneurs register for taxation. Besides the support for company incorporation in Luxembourg, entrepreneurs can solicit our help for Luxembourg tax havens and related aspects. We invite you to send your inquiries and then to discuss with our experts all the aspects referring to company formation in Luxembourg, tax registration, and many more.

More details about the taxation in Luxembourg can be solicited from our team of company formation agents in Luxembourg. Please contact us for support and guidance.

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Taxes in Luxembourg