Other taxes and levies

Other taxes and levies

Taxation of international executives

Related content

Temporary tax for the budget balance

All additional tax information (except where noted) is summarized by KPMG Tax Advisers s.à.r.l., the member firm of KPMG International, based on Ministère des Finances.

Social security tax

Employer and employee

In Luxembourg the registration with the social security authorities is compulsory for all employees. An exemption from paying Luxembourg social security contributions may be granted by the Luxembourg social security Code, a bi- or a multilateral social security agreement applicable to Luxembourg1. The benefits cover the following:

  • healthcare
  • sickness
  • accidents at work
  • maternity
  • family
  • unemployment
  • old-age pension
  • invalidity pension
  • survivor pension.

The State requires contributions from employees and employers as outlined below. The rates apply to employment income including benefits-in-kind (with a limited number of exemptions).

Type of insurance Paid by employer Paid by employee Total
Pension and disability 8.00% 8.00% 16.00%
Health insurance 2.80%* or 3.05%** 2.80%* or 3.05%** 5.60% or 6.10%
Mutual health care 0.46%, 1.21%, 1.85% or  2.93%***
0.00% 0.46%, 1.21%, 1.85% or  2.93%***
Accident insurance 1.00% 0.00% 1.00%
National service for health at work 0.11% 0.00% 0.11%
Total Percent 12.37% to 15.09% 12.20% to 12.45% 24.57% to 27.54%

* 2.80 percent on non periodic remunerations (13 month, bonus, gratifications) and benefits-in-kind (such as a company car).

** 3.05 percent on periodical remuneration such as the salary.

*** Contribution rate depends on the financial absenteeism rate of the employees in the company.

The noted contributions are levied up to ceilings, which are adjusted periodically. The maximum yearly contribution basis for the employee is EUR 115,377.84 at index 775.17. The employee’s contributions are withheld from salary and paid monthly by the employer together with its own employer’s contributions to the authorities.

The employee’s mandatory social security contributions are in principle considered as tax deductible from the Luxembourg individual income tax standpoint.

Indeed, the contributions covered are the health and pension mandatory social security contributions. Foreign equivalent contributions may be tax deductible to the extent that they are mandatory, and covered by a bi- or a multilateral social security agreement applicable to Luxembourg.

Dependency contributions

A dependency contribution of 1.4 percent is due on professional income and income from net assets (investment, rental, and miscellaneous income). It is not capped and not deductible from the Luxembourg individual income tax standpoint. It is calculated on the gross salary and state pension less a monthly abatement of EUR480.74 (index 775.17) with effect from 1 January 2016. For the other categories of income, it is calculated on net income after tax abatements.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Luxembourg?

Net wealth tax on individuals has been abolished as of 1 January 2006.

Luxembourg taxes are imposed on transmission of property by deceased or donors domiciled in Luxembourg, or for non-resident deceased or donors with respect to real estate located in Luxembourg. Each beneficiary, whether resident or non-resident of Luxembourg, has in principle to pay tax on his/her inheritance or gift. Gift tax is levied on the donee in respect of all gifts made in writing. Rates vary depending on the degree of family relationship with the deceased (inheritance) from 0 percent up to 48 percent, or between the donor and the donee (gift), from 1.8 percent up to 14.4 percent. There may be no inheritance tax liability (depending on the level of transmission) on inheritances by direct descendants, or by spouses with children.

Real estate tax

Are there real estate taxes in Luxembourg?

A real estate transfer tax of 6 percent to 9 percent, depending on the locality is levied on the acquisition of Luxembourg real estate together with a registration duty of 1 percent. In case of purchase of a principal residence, each purchaser may benefit (under certain conditions) from a one-time tax credit of EUR 20,000.

Sales/VAT tax

Are there sales and/or value-added taxes in Luxembourg?

The different VAT rates applicable in Luxembourg from 1 January 2016 are 3 percent, 8 percent, 14 percent, and 17 percent. 

Unemployment tax

Are there unemployment taxes in Luxembourg?

As far as the individual income tax is concerned, the tax rate for unemployment fund is 7 or 9 percent depending on the taxable income and the tax class.

Temporary tax for the budget balance

Introduced within the 2015 state budget law, the Luxembourg Government introduced a new temporary tax for the purpose of budget balancing (“impôt d’équilibrage budgétaire”).

  • This temporary tax amounts to 0.5%. It applies to:
  • professional income (wages, commercial profits, self-employed income)
  • replacement income (retirement income, unemployment income) and
  • assets-related income taxable in Luxembourg (dividends, interest, capital gains).
Who is concerned? Income Taxable basis Responsibility Assessed by
Individuals (residents/non
residents) subject to Luxembourg social security
Professional income (*) For wages: Gross income
less 1 x minimum monthly social salary (**)
Employer (***) Social security authorities
(CCSS)
    For self-employed
income/commercial profits: Gross income less ¾ of minimum monthly social salary
(**)
Individual  
  Replacement income (*) Gross income less ¾ of
minimum monthly social salary
Caisse de pension (***)  
Residents and non-residents Assets-related income
taxable in Luxembourg
Net taxable income Individual Tax authorities (Income Tax
offices)
 
(*) specific rules apply in case of part-time, multiple occupations, multiple pensions, concurrence of professional activity/pension.
(**) minimum monthly social wage for non-qualified workers, i.e. EUR 1,922.96 from 1 January 2015 (current index 775.17).
(***) If the employer / caisse de pension do not withhold the tax, they become the debtor of the tax.This temporary tax is aimed at financing improvements in childcare.

Other taxes

Are there additional taxes in Luxembourg that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Local taxes

There is a municipal tax on commercial income derived by an individual in Luxembourg. This tax is not levied on wages earned by the taxpayer, who does not derive commercial income linked to that wage. Furthermore real estate is subject to a ground tax.

Temporary tax

An additional temporary tax of 0.5% applies to the taxable basis reduced by an amount equivalent to 1x the minimum monthly social wage for non-qualified workers, i.e. EUR 1,922.96 (index 775.17 at 1 January 2016), or ¾ of the minimum monthly social wage, depending on the type of taxable income.

© 2016 KPMG Luxembourg S.à r.l, a Luxembourg private limited company, is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform