Luxembourg: Individual tax status | KPMG | GLOBAL

Luxembourg: Individual tax status, new options for non-resident taxpayers

Luxembourg: Individual tax status

As an update to Luxembourg’s 2018 tax reform measures, the tax authorities released guidance regarding an option for individual taxpayers to elect for full individual taxation, individual taxation with reallocation of income for resident and non-resident taxpayers, and joint taxation.

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The three options for individuals (including non-residents) subject to taxation in Luxembourg are:

  • Fully individual taxation: Income is allocated to each spouse individually, and deductions are equally divided between both spouses.
  • Individual taxation with reallocation of income: The total income of the household is, by default, allocated equally between spouses without taking into account the level of their individual income. A different allocation can be requested by the taxpayers.
  • Joint taxation: The total income of the household is subject to the favourable tax rate of tax class 2.

The Luxembourg tax authorities in early October 2017 began sending letters to all married non-resident taxpayers who receive employment income or pension income in Luxembourg, informing taxpayers that they may:

  • Apply for one of the three methods of tax status and taxation; and
  • Have a personalised tax rate included in their 2018 tax cards, based on information with the tax authorities

 

Read an October 2017 report prepared by the KPMG member firm in Luxembourg 

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