Luxembourg Income Tax Calculator (LU) 2024

Understanding Income Tax In Luxembourg

Is Luxembourg the place to be? Let’s first understand the income tax in Luxembourg as an important factor in your relocation decision. Here is what you need to know.

As an individual considering relocation, it’s important to understand the tax system of your potential new home.

This post will help you understand the income tax system in Luxembourg, including taxpayer rules, tax rates and brackets, tax benefits, and strategies to reduce your tax burden.

Luxembourg is a small European country known for its high standard of living and robust economy with a progressive tax system. This means that the more you earn, the higher your tax rate. However, the tax system is also designed to provide several benefits and deductions that can significantly reduce your tax burden.

Taxpayer Rules

In Luxembourg, residents are taxed on their worldwide income, while non-residents are taxed only on income earned within the country. You are considered a resident if you live in Luxembourg for more than six months in a year.

Income Tax In Luxembourg: Tax Rates

The income tax rates in Luxembourg are progressive, ranging from 0% to 44%. The tax brackets are divided into 23 categories, starting from an annual income of €0 to over €350,000.

Here is the complete list of tax rates in the shape of salary ranges. Notice, if you make up to €11,265 a year, you don’t pay any tax!

1. €0 – €11,265: 0%
2. €11,266 – €13,173: 8%
3. €13,174 – €15,081: 10%
4. €15,082 – €16,989: 12%
5. €16,990 – €18,897: 14%
6. €18,898 – €20,805: 16%
7. €20,806 – €22,713: 18%
8. €22,714 – €24,621: 20%
9. €24,622 – €26,529: 22%
10. €26,530 – €28,437: 24%
11. €28,438 – €30,345: 26%
12. €30,346 – €32,253: 28%
13. €32,254 – €34,161: 30%
14. €34,162 – €36,069: 32%
15. €36,070 – €37,977: 34%
16. €37,978 – €39,885: 36%
17. €39,886 – €41,793: 38%
18. €41,794 – €150,000: 39%
19. €150,001 – €200,004: 40%
20. €200,005 – €250,000: 41%
21. €250,001 – €300,000: 42%
22. €300,001 – €350,000: 43%
23. Over €350,000: 44%

Tax Benefits

Luxembourg offers several tax benefits to reduce your tax burden. These include deductions for social security contributions, insurance premiums, home loan interest, and donations to approved organizations.

Additionally, families can benefit from child allowances and single-parent allowances.

Reducing Tax Burden

To reduce your tax burden in Luxembourg, it’s advisable to take full advantage of the available tax deductions and benefits. For instance, contributing to a pension scheme can result in significant tax savings. Also, if you’re self-employed, you can deduct business expenses from your taxable income.

Recommendations

If you’re considering relocating to Luxembourg, it’s worth comparing its tax system with similar countries. The Netherlands, for instance, also has a progressive tax system with rates ranging from 37.10% to 49.50%. However, the Netherlands offers a 30% ruling for expatriates, which allows them to earn 30% of their salary tax-free.

Belgium, another neighboring country, has a similar standard of living to Luxembourg. It also has a progressive tax system, with rates ranging from 25% to 50%. However, Belgium offers a higher personal allowance, which can reduce your tax burden.

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Final Thoughts

In conclusion, Luxembourg’s tax system is designed to be fair, with numerous benefits and deductions available to reduce your tax burden. Its high standard of living and robust economy make it an attractive destination for relocation. This article explains all you need to know to make an informed decision.