Taxation of international executives
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.
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:
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%, 1.16%, 1.77% or 2.95%***
||0.00%||0.46%, 1.16%, 1.77% or 2.95%***
|National service for health at work||0.11%||0.00%||0.11%|
|Total Percent||12.27% to 15.01%
||12.20% to 12.45%
||24.47% to 27.46%
* 2.80 percent on non periodic remunerations (13 month, bonus, gratifications) and benefits-in-kind (such as a company car).
** 3.05 percent on 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 119,915.16 at index 794.54. 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.
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.
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 taxable basis from the Luxembourg individual income tax standpoint. It is calculated on the gross income from salary and state pension less a monthly abatement of EUR 499.65 (index 794.54) with effect from 1 January 2018. For the other categories of income, it is calculated on net income after tax abatements.
Are there any gift, wealth, estate, and/or inheritance taxes in Luxembourg?
Luxembourg inheritance / gift taxes may be due on transmission of property by deceased or donors resident in Luxembourg, or for non-resident deceased or donors with respect to real estate located in Luxembourg. 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), or between the donor and the donee (gift), from 0 percent up to 48 percent. There may be no inheritance tax liability (depending on the level of transmission) on inheritances by direct descendants, or by spouses or registered partners.
Are there real estate taxes in Luxembourg?
A real estate property transfer tax of 6 percent to 9 percent, depending on where the real estate property is located is levied on the acquisition of Luxembourg real estate property together with a transcription duty of 1 percent. In case of purchase of a principal residence, each purchaser may benefit (under certain conditions) from a maximum abatement of EUR 20,000 (doubled for couples).
Should the real estate property be acquired for resale, then the registration duty rate is increased to amount between 7.2 percent and 10.8 percent. The transcription duty rate remains at 1 percent. In case the subsequent resale is registered within two years after the acquisition, the initial registration duties are reduced by 6 percent or 9 percent so the aggregate transfer duties for the acquisition amount to 2.2 percent and 2.8 percent respectively, including transcription duty. If the resale is registered within four years after the acquisition, the initial registration duties are reduced by 4.8 percent and 7.2 percent (if the municipal surcharge applies) so the aggregate transfer duties for the acquisition amount to 3.4 percent and 4.6 percent (if the municipal surcharge applies).
In the case where Luxembourg real estate is contributed to a company (whether Luxembourg resident or foreign) against the issuance of shares, a real estate transfer tax reduced rate of 1.4 percent is due, if the real estate property is located in Luxembourg City and of 1.1 percent if otherwise.
Are there sales and/or value-added taxes in Luxembourg?
The different VAT rates applicable in Luxembourg for 2018 on are 3 percent, 8 percent, 14 percent, and 17 percent.
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.
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.
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.
Is there a requirement to declare/report offshore assets (e.g., foreign financial accounts, securities) to the country’s fiscal or banking authorities?
No, there is no separate filing for this.
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.
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