Taxes in Luxembourg in 2026

Luxembourg tax rates in 2026: the short version

Luxembourg takes less from high incomes than its neighbours and almost nothing from a private investor's capital. The top income tax rate is 42%, while Germany has 45% plus a surcharge, France 45% plus an extra tax on high incomes, and Belgium 50%. The standard 17% VAT is the lowest in the European Union. On the other hand, a single person on an average salary pays noticeably, and housing is among the most expensive in Europe.

The income tax scale was not indexed in 2026: the 2025 thresholds apply. The 16% corporate rate and the €50,000 VAT exemption threshold have applied since 1 January 2025, so older guides quoting 17% and €35,000 are out of date. You can compare Luxembourg with other countries on the taxes by country page.

Compare taxes in 146 countries: relocation taxes 2026

Who counts as a tax resident of Luxembourg

You become a Luxembourg resident if you have a home here that you actually use, or if you stay in the country for more than six consecutive months. Short trips do not interrupt the count, and the six months may straddle two calendar years. The rule is in the 1934 tax adaptation law, which is still in force.

A resident pays tax on worldwide income: salary, dividends, rent from a flat in Moscow or Dubai all go into the return, and treaties remove double taxation. A non-resident pays only on Luxembourg income: salary for work in the country, rent from local property, a director's fee from a Luxembourg company. How to count days when moving is covered in our guide to the 183-day rule.

Three tax classes

The tax depends not only on income but on the class. For a family with one earner the difference between classes is thousands of euros a year.

Non-residents fall into class 1 by default, even if married. They get class 2 on application if at least 90% of the household's income is taxed in Luxembourg or income outside it is no more than €13,000 a year.

The class system is in its last years. On 6 January 2026 the government submitted a bill for a single tax class: from 2028 everyone will be taxed on one scale, similar to today's class 1a scale, and the tax-free part of income will be doubled. Couples already married will get a transition period. Until 2028 the three classes apply.

How to stop being a resident

Residency ends when you no longer have a home in Luxembourg that you use and you do not spend six consecutive months here. In practice you deregister at the commune, give up or let the flat and file a final return for the year of departure. If you keep Luxembourg income - rent, a director's fee - you go on paying tax on it as a non-resident.

Luxembourg tax residency rules: how to become resident and count days

You become resident here faster than you might think: a flat you actually use, or more than six consecutive months in the country, is enough. A flat for business trips easily turns into a resident's home.

A resident pays 0% to 42% on worldwide income, a non-resident only on Luxembourg income. If your family lives in a neighbouring country and you work in Luxembourg, residency is decided under the treaty between the two countries.

The law does not stop you from confirming your status on your own. But mistakes cost more: dual residency in the year of the move, when both countries demand tax, or class 1 instead of class 2, which makes a family overpay thousands of euros. Murblz support removes these risks: we count days, check the home and ties, obtain a residency certificate and apply the double tax treaty. We guarantee professional work and a transparent process, and in most cases a result on the first application.

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Luxembourg income tax: the 0-42% scale and surcharge

The first €13,230 of annual income is tax-free, and the 42% rate starts only at €234,870. In between there are more than twenty bands: first the rate rises by 1-2 points every €2,205, then come the long 39%, 40% and 41% bands.

An employment fund contribution is added to the tax: 7% of the tax, or 9% for a single person with taxable income above €150,000. That makes the highest marginal rate 45.78%.

The rates are marginal, not average. A single person with €52,050 of taxable income pays €8,225 of tax, about 16%, even though the last euros are taxed at 38%. An effective rate of 30% starts at around €110,000 of taxable income a year.

What reduces the tax base

• pension and health contributions;
• minimum allowances for work-related and special expenses, given without receipts;
• mortgage interest on your own home, within a limit that depends on how long you have owned it;
• contributions to a private pension plan - from 2026 up to €4,500 a year per person instead of €3,200.

Dividends and interest for a resident

A resident includes dividends in income on the scale, but half of a dividend from a company in the EU or a treaty country is exempt, and the first €1,500 of dividends a year is tax-free, €3,000 for a couple. The 15% withheld is credited against the tax. Interest on deposits and bonds at a Luxembourg bank is taxed at 20% at source and is no longer entered in the return.

How much tax is actually paid

The average rate is well below the marginal rate. A worked example for a single person in class 1, including the employment fund surcharge:

Luxembourg salary tax: a worked example and social contributions

On a salary of €5,000 a month a single person takes home about €3,630. That is less than the modest-looking scale suggests, because social contributions are added to the tax. From 1 January 2026 the pension contribution rose from 8% to 8.5% for both employee and employer - the first step of the pension reform.

Contributions are charged on salary up to five minimum wages: from 1 June 2026 the ceiling is €13,856.63 a month, and the unskilled minimum wage is €2,771.33. No contributions are paid on income above the ceiling, which is a noticeable saving for highly paid specialists.

Worked example: €5,000 a month, class 1, no children

The calculation ignores tax credits and personal deductions - commuting, mortgage, insurance - so in practice net pay comes out slightly higher. On top of salary the employer pays about 12.5-15% in contributions, so the employee costs the company roughly €5,630-5,750 a month. The employer withholds tax according to the tax card.

Salaries in Luxembourg are indexed automatically: when inflation accumulates, all wages and pensions rise by 2.5%. This last happened on 1 June 2026, and the contribution ceiling rose with the minimum wage. The tax scale thresholds do not move automatically, so without a separate decision by parliament part of the increase goes in tax.

How much tax a family pays in Luxembourg

A family with one earner pays three times less tax in Luxembourg than a single person on the same salary. The reason is class 2: income is split between two, and each half becomes taxable only above €13,230.

The difference is about €5,900 a year. So spouses moving to Luxembourg should file jointly straight away, and non-residents should apply for class 2. Otherwise the tax authority withholds tax as for a single person and refunds the overpayment only on a return.

The 2028 reform changes the picture: a single class with a doubled tax-free part will lower tax for single people and introduce separate taxation for couples marrying after the reform. Families already married have been promised a transition period.

How much tax a specialist pays: an example with the inpatriate regime

A worked example for a single person earning €120,000 a year, or €10,000 a month. The calculation is simplified: no tax credits or personal deductions, and contributions are charged on the whole salary because it is below the ceiling.

The difference is almost €25,000 a year, or about €2,000 a month, for up to eight years. That is why the inpatriate regime is discussed with the employer before signing the contract: arranging it afterwards is much harder.

Luxembourg corporate tax and how dividends are taxed

A company in Luxembourg City pays 23.87% of its profit. The rate has three parts: 16% state corporate tax, a 7% employment fund surcharge on that amount, and municipal business tax, which is 6.75% in the capital. In other communes the municipal tax is higher, and the total rate reaches 27.62%.

On top of corporate tax a company pays 0.5% of its net assets every year. Even a loss-making company pays a minimum: €535 with a small balance sheet and up to €4,815 for holdings with a large one. For a company with a single subsidiary this is effectively a fee for existing.

Why holding companies choose Luxembourg

Dividends and gains on the sale of subsidiaries are exempt if the holding owns at least 10% of the capital or a stake worth €1.2 million or more (€6 million for gains on sale) for more than 12 months, and the subsidiary pays comparable corporate tax. This rule, not the low rate, made the country home to thousands of holdings and funds.

On dividends paid abroad the company withholds 15%. A parent company from the EU or a treaty country with a stake of 10% or more held for 12 months is paid without withholding. Luxembourg hardly taxes interest and royalties at source; directors' fees are taxed at 20%.

For an individual owner their own company costs more than it seems: first 23.87% on profit, then dividends, half of which are taxed on the scale. At a high rate the total burden on distributed profit comes to about 40%. The minimum capital of a limited liability company is €12,000, and of a public limited company €30,000. Details are on the company registration in Luxembourg page, and an account in the business accounts in Luxembourg section.

Example: a holding with a subsidiary

A Luxembourg holding owns 100% of a German subsidiary and receives €1 million of dividends from it. The exemption conditions are met: a stake above 10%, ownership over 12 months, the subsidiary pays ordinary corporate tax. Corporate tax on these dividends is 0%, and the subsidiary's shares stay out of the net wealth tax base. The holding pays the minimum net wealth tax and running costs: accounting, an office and local directors, without whom other countries' tax authorities will not recognise it as genuine.

Luxembourg VAT and when to register

Standard VAT in Luxembourg is 17%, lower than in any other EU country. Among the neighbours, Germany charges 19%, France 20% and Belgium 21%.

Small businesses with turnover up to €50,000 a year operate without VAT. How often returns are filed depends on turnover: up to €112,000 once a year, up to €620,000 quarterly, above that monthly. VAT in Luxembourg is administered not by the tax authority but by a separate registration and estates administration, and all returns are filed electronically only.

A company selling goods or digital services to buyers in other EU countries pays the buyer's country VAT once such sales exceed €10,000 a year. There is no need to register in each country: the return is filed through the one-stop shop in Luxembourg.

A 3% rate on housing is rare in Europe. When building or renovating a flat the buyer will live in, the difference between 17% and 3% is refunded, up to €50,000 per property.

Tax incentives for expats, young professionals, start-ups and freelancers

Half of salary tax-free for up to eight years after the year of arrival - that is how Luxembourg lures specialists from London, Paris and Zurich. Since 1 January 2025 the inpatriate regime exempts 50% of remuneration, calculated on no more than €400,000, so at most €200,000 a year stays untaxed.

• Salary of at least €75,000 a year.
• For five years before the move the worker was not a Luxembourg resident, did not pay income tax here and did not live within 150 km of the border.
• At least 75% of working time is in Luxembourg.
• The regime is arranged by the employer, so it is discussed before signing the contract.

Freelancers, sole traders and digital nomads

Luxembourg has no simplified regime for small businesses such as a flat-rate or turnover tax. A freelancer registers as self-employed, obtains a permit from the economy ministry if required and pays income tax on profit on the general scale, social contributions and municipal tax on profit above €40,000. Self-employed contributions are about 25% of income, because the self-employed pay both their own share and the employer's. Up to €50,000 of turnover no VAT is needed.

Luxembourg has no digital nomad visa. A third-country national working for themselves needs a self-employed or investor residence permit - options are on the Luxembourg residence page.

IT companies should look at the intellectual property regime: 80% of net income from patents and protected software is exempt from corporate tax if the company did the development itself.

What a self-employed person pays: a worked example

A freelancer with €60,000 of profit a year gives up roughly a third in Luxembourg. A simplified worked example for a single person in class 1:

Municipal tax is paid only on profit above €40,000, and for a freelancer it is usually small. The main cost is contributions: the self-employed pay both their own share and the employer's. The contribution base cannot be below the minimum wage even if income is lower, so in a first year with small turnover contributions are especially noticeable.

If profit grows, it makes sense to compare self-employment with your own company: 23.87% on profit and a director's salary that can be kept moderate. For turnover up to €50,000 a year no VAT is needed.

What taxes a pensioner pays in Luxembourg

A pension in Luxembourg is taxed on the same scale as a salary, but a single person over 64 at the start of the year moves to class 1a with a softer scale. Health and care contributions are withheld from the pension, while pension contributions are no longer paid.

A resident's foreign pension is part of worldwide income. A Russian state pension is not taxed in Russia, so there is nothing to credit, and the tax is calculated in Luxembourg. The Russian side has suspended the treaty article on pensions, but the tax credit still works.

For a pensioner from Russia the main question in Luxembourg is usually not tax but residence and the cost of housing: rent in the capital eats up most of an average pension. So pensioners more often choose countries with a dedicated retirement visa, and Luxembourg when their children live nearby.

Taxes on property, inheritance, capital gains and crypto

A €1 million flat in the capital costs the buyer €100,000 in duties, but if they live in it themselves the state returns up to €40,000, or up to €80,000 for a couple. Selling it without full tax is possible only after five years: from 1 July 2025 the speculative period rose from two years to five.

Buying

On purchase you pay 6% registration duty and 1% for entry in the register, and Luxembourg City adds another 3%. The tax credit for buying a home to live in is €40,000 per buyer, and since 2025 it is permanent. The condition is to move in within two years and live there for at least two years, otherwise the credit is repaid.

Owning, renting and selling

Rental example: a flat let for €2,500 a month brings €30,000 a year. Loan interest, repairs, insurance and depreciation of the building are deducted, and the remainder is taxed on the scale together with other income. For new flats depreciation noticeably reduces the base, so tax on rent is often lower than expected.

Inheritance and gifts

Children, parents and spouses with common children pay no inheritance tax on the statutory share. A spouse without common children pays 5% on the amount above €38,000, brothers and sisters 6%, uncles, aunts, nephews and nieces 9%, unrelated people 15%. For large shares the rate is increased by a surcharge, reaching 48% for unrelated heirs. A resident's foreign property is not part of the Luxembourg base.

Gifts through a notary carry duty: 1.8% or 2.4% to children, 4.8% to a spouse, 6% to brothers and sisters, 14.4% to unrelated people, plus another 1% on gifts of property. A hand gift of money or securities without a notarial deed carries no duty.

Cryptocurrency

Since 2018 the tax authority has treated cryptocurrency as other movable property. An individual's profit from selling coins held for more than six months is not taxed. Selling sooner is taxed on the scale if the year's gain exceeds €500. Mining and active trading may be treated as a business, and then the whole profit is taxed. From 1 January 2026 EU crypto exchanges report client data to tax authorities, so such income has become visible.

Buying a flat in Luxembourg: a worked example of duties

Duties on buying a home in Luxembourg are high, but for buyers purchasing a flat to live in, the tax credit almost fully offsets them.

A flat bought to let gets no credit: an investor pays the duties in full. A new build for your own home is also attractive because of 3% VAT instead of 17% on construction. How to choose a property and complete the deal is covered in our Luxembourg section.

Which taxes Luxembourg does not have, and what else you pay

• Wealth tax for individuals has not existed since 2006.
• Exit tax on gains does not apply to an ordinary investor. The exception is large stakes of 10% or more: if a person lived in Luxembourg for more than 15 years and sells such a stake within 5 years of leaving, the gain is taxed.
• Car tax is paid every year and depends on carbon dioxide emissions and engine type; for an electric car it is minimal.
• Property tax is symbolic: it is based on 1941 values.
• Church tax does not exist in Luxembourg.

Luxembourg's tax authority exchanges account data with dozens of countries, and from 2026 it also receives information from EU crypto exchanges. A resident must include foreign income in the return, and it is simpler to do so straight away than to explain discrepancies in an audit.

Non-resident taxes, withholding and double tax treaties

Almost half of Luxembourg's workforce lives abroad and commutes daily from France, Belgium and Germany. An important threshold applies to them: up to 34 days a year of working from home, the salary is taxed entirely in Luxembourg. From the 35th day the country of residence may tax all days worked outside Luxembourg.

Luxembourg has more than 80 double tax treaties, including with Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Azerbaijan and Moldova.

What happened to the treaty with Russia

The 1993 treaty, amended by the 2020 protocol, is formally in force but works only halfway. By a Russian presidential decree of 8 August 2023 the Russian side suspended the articles on dividends, interest, royalties, income from property and from work. So tax on payments from Russia to Luxembourg is withheld at full Russian rates: 15% on dividends, 30% on most income of non-resident individuals.

The articles on residency, elimination of double taxation and exchange of information remain in force, and Luxembourg has not terminated the treaty. A Luxembourg resident credits Russian tax up to the Luxembourg tax on the same income. Banks are a separate issue: under EU rules they do not accept deposits above €100,000 from Russian citizens until the client has a residence permit or citizenship of an EU country.

Accounts and banks: what matters for Russian citizens

Luxembourg banks open accounts for Russian citizens cautiously. Under EU rules they do not accept deposits above €100,000 from Russian citizens and residents until the client has a residence permit or citizenship of an EU country. So the residence permit comes first, and large sums are transferred afterwards.

When opening any account the bank asks about the source of funds and tax residency. Proof of income for several years, property sale contracts and tax returns are best prepared in advance. The bank reports account data to the tax authority, which exchanges it with the countries Luxembourg has automatic exchange with.

Opening an account for a company is harder than for an individual: the bank checks the owners, the actual business and the office. We help prepare the document pack so the check passes the first time.

How cross-border workers pay tax

A worker living in France, Belgium or Germany and commuting to Luxembourg pays tax on their salary in Luxembourg until they cross the threshold of 34 days of working from home a year. Half a working day at home counts as a full day, and business trips to third countries also count.

If the threshold is exceeded, the country of residence taxes all days outside Luxembourg from the first, not only the extra ones. Luxembourg then taxes only the days worked on its territory. So cross-border workers keep a calendar and agree with the employer how many days can be worked from home.

A non-resident whose income is almost all from Luxembourg can ask for class 2 for the family. For that, at least 90% of the couple's income must be taxed in Luxembourg or income outside it must be no more than €13,000 a year. The return then shows all worldwide income, while tax is charged on the Luxembourg part at the rate calculated on the total.

When to file your return and late-filing penalties

The return for 2025 can be filed until 31 December 2026 - one of the longest deadlines in Europe. It is filed online through the government portal or on paper.

Everyone must file who has taxable income above €100,000, several salaries or pensions, income without withholding - rent, business income, foreign dividends - and non-residents who chose class 2. Others file voluntarily to recover allowances.

Sanctions are milder than in neighbouring countries. For a late return the tax authority may add up to 10% to the tax, and late payment carries 0.6% a month. Tax can be reassessed for five years, or ten if there was no return or it was incomplete. The main risk for people moving is not fines but lost allowances and class 1 instead of class 2: without a return nobody refunds the overpayment.

How to file your first return in Luxembourg

The first return is easiest to file online through the government portal with an electronic signature. It lists all income for the year, including foreign income, and deductions: private pension contributions, mortgage interest, insurance, commuting costs.

1. Collect income statements from every country for the year.
2. Check your class, and file jointly as a couple.
3. State foreign taxes paid on the same income - they will be credited.
4. File by 31 December of the following year and wait for the tax assessment.

If the employer withheld more than necessary, the overpayment is refunded on the return. Without it the tax authority leaves everything as it is.

Common tax mistakes when moving to Luxembourg

1. Class 1 for a married couple. The spouses did not file jointly, and tax is withheld as for single people - the overpayment reaches several thousand euros a year.
2. A contract without the inpatriate regime. The employer arranges the regime, and if it was not built into the contract at hiring, half of the salary is taxed in full.
3. Selling a flat before five years. Since July 2025 such a sale is taxed on the full scale.
4. Shares sold after five months. Wait one more month and a private investor's gain is not taxed.
5. Remote work by a cross-border worker. The 35th day of working from home in France, Belgium or Germany changes the taxation of all days outside Luxembourg.
6. Foreign income left out of the return. Rent from a flat back home or dividends from a foreign broker are also part of a resident's worldwide income, and the tax authority receives account data automatically.
7. A deposit above €100,000 before getting residence. An EU bank will not accept such a deposit from a Russian citizen.

All these mistakes are cheaper to prevent than to fix. Murblz specialists check them before the move and before the employment contract is signed.

How to start paying taxes in Luxembourg: step by step

1. Registration at the commune. After moving you register your address, and residency is counted from that day.
2. Tax card. It is issued by the tax authority, and the employer withholds tax according to it, taking your class into account.
3. Joint return for spouses. It is filed to obtain class 2 and allowances.
4. Inpatriate regime. The employer arranges it at hiring, and you check that the 150 km and five-year conditions are met.
5. First return. It is filed by 31 December of the following year, including foreign income.

A tip from practice: keep proof of entry and exit dates, the lease and the commune registration. In a disputed year these documents decide which country may tax your income, and without them it is hard to prove the date residency changed.

If you come not as an employee but as a self-employed person or investor, you first obtain a residence permit and register the activity, and tax obligations arise with the first income.

How Luxembourg's taxes compare with its neighbours

Luxembourg beats its neighbours on almost every rate except corporate tax, where it sits in the middle. Details are on each country's page.

For a private investor the difference is even more noticeable: in neighbouring countries gains on shares are almost always taxed, while in Luxembourg after six months of ownership they are not.

What Luxembourg's taxes mean for someone moving: who it suits and who it does not

Luxembourg wins for three types of people: a salaried specialist earning €75,000 or more who gets the inpatriate regime; a private investor in shares and crypto whose gains after six months are untaxed; and a holding owner who needs an EU country exempting dividends from subsidiaries. A family with one earner adds class 2 to this.

Who Luxembourg does not suit

People hoping for low tax without moving: residency here requires a real home and life in the country, and neighbouring tax authorities keep a close eye on their former residents. People earning from property resales: five years of waiting for the reduced rate make that model expensive. And people looking for a simplified small-business regime: there is none, and self-employed contributions start from the minimum wage.

How to move and what we do

A third-country national first needs a status: options from employment to investment are on the Luxembourg residence page, and after five years in the country the path to a passport opens - see Luxembourg citizenship. A general overview of the country is in the Luxembourg section.

Before moving, three questions are worth settling: from which month to become resident to avoid dual residency; whether to sell assets with built-up gains before or after the move; and how to write the inpatriate regime into the employment contract. Murblz specialists calculate the scenarios in figures and handle the paperwork together with partners licensed in Luxembourg.

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