Jurisdiction overviewTax in Luxembourg
Last reviewed: · by TaxProsRated editorial
Key points
Luxembourg's Administration des Contributions Directes (ACD) administers personal income tax across 23 progressive bands (0-42%, plus solidarity surcharge) — among the most granular PIT structures globally. Corporate IRC is 17% plus 7% solidarity plus 6.75% municipal business tax, combining to ~24.94% in Luxembourg City. Standard TVA rate is 17% (lowest in the EU). Luxembourg dominates European fund-servicing, hosting ~EUR 5 trillion in investment fund assets as the world's second-largest fund domicile. SOPARFI holding companies benefit from a broad participation exemption. IP-box effective rate is 5.2% on qualifying income. Pillar Two QDMTT applies from 31 December 2023.
~EUR 5 trillion in investment fund assets under administration
Luxembourg's UCITS and AIFMD fund platforms domicile roughly EUR 5 trillion in assets, second only to Ireland. CSSF supervises investment managers; Reserved Alternative Investment Funds (RAIFs), SICAVs, ELTIFs, and SIF frameworks give fund promoters extensive structuring options. Fund services represent over 30% of national GDP.
Who is the tax authority in Luxembourg?
The Administration des Contributions Directes (ACD) administers direct taxes — personal income tax, corporate income tax, municipal business tax, and the solidarity surcharge. The Administration de l'Enregistrement, des Domaines et de la TVA (AED) administers VAT, registration duties, and other indirect taxes. Customs fall under the Administration des Douanes et Accises.
The primary personal e-filing portal is MyGuichet.lu. Substantive law rests on the Income Tax Law (Loi modifiee du 4 decembre 1967 concernant l'impot sur le revenu, LIR) and successive amendments. The credentialed professions are regulated by the Institut des Reviseurs d'Entreprises (IRE) and the Ordre des Experts-Comptables (OEC).
What is the Luxembourg tax year and when are returns due?
The tax year is the calendar year (1 January to 31 December). Personal income tax returns are due 31 December of the year following the tax year — a generous window compared to most EU peers. Corporate annual returns are due 31 May of the year following fiscal year-end.
VAT returns are filed monthly (for businesses above EUR 620,000 annual turnover) by the 19th of the following month, or quarterly below that threshold. Withholding tax (Retenue a la Source, RTS) on employment income applies monthly.
Who counts as a Luxembourg tax resident?
Under the LIR, an individual is a Luxembourg tax resident if either condition applies:
- They maintain a domicile or habitual residence in Luxembourg
- They are physically present in Luxembourg for at least 6 months
Residents are taxed on worldwide income. Non-residents pay tax only on Luxembourg-source income. Treaty tie-breakers apply where two jurisdictions both claim residency.
Luxembourg operates three tax classes that affect personal allowances and brackets. Class 1 applies to single individuals; Class 1a to single parents with dependants; Class 2 to married couples filing jointly. The tax-class choice has material consequences — especially for the 23-bracket rate structure.
A distinctive local issue is the frontalier workforce. Approximately 45% of Luxembourg's working population are cross-border commuters (frontaliers) from France, Belgium, and Germany. Each group has different treaty obligations: French frontaliers are taxed in Luxembourg on their Luxembourg-sourced salary; certain Belgian and German rules differ. A qualified Tax-Adviser is usually needed to reconcile home-country and Luxembourg obligations.
Deep-dive: see expat and cross-border tax in Luxembourg.
What are the personal income tax rates?
Luxembourg operates one of the most granular personal income tax structures globally — 23 progressive bands ranging from 0% to 42%. This is far more brackets than any peer in the EU financial-centre cohort.
| Yearly income (EUR) — Class 1 (single) | Marginal rate |
|---|---|
| Up to 12,438 | 0% |
| 12,439 to ~14,508 | 8% |
| ~14,509 to ~16,578 | 9% |
| ~16,579 to ~18,648 | 10% |
| ~18,649 to ~20,718 | 11% |
| ~20,719 to ~22,788 | 12% |
| ~22,789 to ~24,939 | 14% |
| ~24,940 to ~27,090 | 16% |
| ~27,091 to ~29,241 | 18% |
| ~29,242 to ~31,392 | 20% |
| ~31,393 to ~33,543 | 22% |
| ~33,544 to ~35,694 | 24% |
| ~35,695 to ~37,845 | 26% |
| ~37,846 to ~39,996 | 28% |
| ~39,997 to ~42,147 | 30% |
| ~42,148 to ~44,298 | 32% |
| ~44,299 to ~46,449 | 34% |
| ~46,450 to ~48,600 | 36% |
| ~48,601 to ~50,751 | 38% |
| ~50,752 to ~110,403 | 39% |
| ~110,404 to ~165,602 | 40% |
| ~165,603 to ~220,788 | 41% |
| Over ~220,788 | 42% |
On top of the 42% marginal rate, a solidarity surcharge (contribution au fonds pour l'emploi) applies: 7% on assessed PIT for most residents (rising to 9% for high earners above EUR 150,000 employment income). The combined effective top marginal rate reaches approximately 45-48%.
Social security contributions (CCSS) add approximately 12.45% on the employee side and a matching employer contribution plus accident-insurance variable. Investment income from Luxembourg companies faces a 15% withholding with a 50% partial-income-inclusion exemption.
How does Luxembourg corporate tax work?
Luxembourg's corporate income tax (IRC) combines three layers: 17% IRC + 7% solidarity surcharge on IRC + 6.75% municipal business tax (ICC) in Luxembourg City. The all-in effective combined rate in Luxembourg City is approximately 24.94%. Rates in other municipalities differ because the ICC varies by commune.
Corporate income tax rate from 2025. Raised from 15% over successive reforms to align with Pillar Two floor.
7% solidarity surcharge on IRC + 6.75% municipal business tax (ICC) in Luxembourg City. ICC rate varies by commune.
All-in effective rate in Luxembourg City. Among the lower EU combined rates after Ireland 12.5%, Hungary 9%, Cyprus 12.5%.
Withholding tax on dividends paid to non-residents is 15% (0% under the EU Parent-Subsidiary Directive for qualifying EU/EEA participations). Tax losses carry forward for 17 years (post-2017 reform; pre-2017 losses retain indefinite carryforward). Net Wealth Tax (Impot sur la fortune) applies at 0.5% on net corporate wealth above EUR 500 million and 0.05% above that.
The OECD Pillar Two Qualified Domestic Minimum Top-up Tax (QDMTT) and Income Inclusion Rule (IIR) apply from 31 December 2023 under the Loi du 22 decembre 2023 transposing EU Directive 2022/2523. The Undertaxed Profits Rule (UTPR) applies from 31 December 2024.
SOPARFI, IP box, and holding-company regimes
Luxembourg's SOPARFI (Societe de Participations Financieres) is the workhorse holding vehicle. A SOPARFI is a fully taxed Luxembourg company that benefits from a broad participation exemption: qualifying dividends and capital gains from subsidiaries are 95-100% exempt from IRC, subject to minimum participation thresholds (10% or EUR 1.2 million cost).
Qualifying dividends and capital gains from subsidiaries are 95-100% exempt from IRC. Most widely used Luxembourg holding structure for MNE groups and PE fund portfolios.
Societe de gestion de Patrimoine Familial — subject to subscription tax rather than IRC. Available only to private individuals and family groups. Not for commercial activities.
Under Article 50ter LIR, 80% of qualifying IP income is exempt from IRC — producing an effective rate of approximately 5.2% on qualifying income. OECD nexus-aligned; patents and certain other qualifying IP apply.
Investment company in risk capital (SICAR) and special limited-partnership structures (SCS, SCSp) used for private equity and venture-capital fund structures. CSSF-supervised.
Deep-dive: see corporate holding structures in Luxembourg.
What about TVA (VAT) and indirect taxes?
Luxembourg's Taxe sur la Valeur Ajoutee (TVA) carries the lowest standard rate in the EU at 17% (raised from 16% as of 1 January 2024). Four rate bands apply:
| Rate | Applies to |
|---|---|
| 17% | Standard — most goods and services |
| 14% | Intermediate — selected categories |
| 8% | First reduced — foodstuffs, accommodation, books, pharmaceuticals |
| 3% | Super-reduced — specified essentials including certain food, medicines, restaurants |
| 0% | Exports (zero-rated, not exempt) |
Mandatory TVA registration applies above EUR 35,000 annual turnover. The EU OSS and IOSS regimes cover cross-border B2C digital supplies. Registration duties (administered by AED) apply to real-estate transactions and certain financial instruments.
How are cryptoassets taxed?
Luxembourg applies a hold-duration rule to individual cryptoasset gains under the LIR. Gains on cryptoassets held for fewer than 6 months are treated as speculative income and subject to ordinary progressive PIT rates. Gains on cryptoassets held for more than 6 months are generally tax-exempt for individual non-business holders — a distinctive feature relative to most EU peers.
EU MiCA Regulation — effective December 2024
The EU Markets in Crypto-Assets (MiCA) Regulation became fully effective on 30 December 2024. Crypto-asset service providers (CASPs) operating in Luxembourg are supervised by the CSSF. Luxembourg's pre-MiCA fund-licensing framework for crypto funds under UCITS/AIFMD gave it an early-mover advantage that continues under the MiCA-era harmonised regime.
Mining and staking income are treated as commercial income or other income depending on the regularity and scale of the activity. Institutional crypto vehicles inside the UCITS or AIFMD fund frameworks fall under the fund-supervisory regime.
Deep-dive: see crypto taxation in Luxembourg.
What is the Luxembourg treaty network?
Luxembourg maintains approximately 85 active bilateral double-tax conventions — one of the largest networks globally for a country of its size. The network reflects Luxembourg's historic role as a holding-company and fund-administration jurisdiction requiring broad coverage for inbound investment flows.
Luxembourg ratified the OECD Multilateral Instrument (MLI) on 9 April 2019; modifications entered force from 1 August 2019 for covered treaties. The Principal Purpose Test (PPT) and Simplified Limitation on Benefits clause apply to covered agreements. Luxembourg also benefits from the full suite of EU directives: Parent-Subsidiary, Interest and Royalties, Merger, and Anti-Tax Avoidance Directives.
Luxembourg's banking secrecy was effectively eliminated through CRS adoption effective 2017. DAC2 and automatic exchange of financial account information now cover all CRS-participating jurisdictions.
Deep-dive: see tax treaty relief in Luxembourg.
Where does Luxembourg sit in the EU financial-centre cohort?
Luxembourg anchors the EU financial-centre holding-company cohort alongside Ireland, the Netherlands, Malta, and Cyprus. The broader EU jurisdictions cluster into five archetypes based on tax positioning.
Meet a Luxembourg-resident taxpayer
Common pitfalls for individuals and businesses
Foreign companies and individuals encounter a consistent set of traps when operating in Luxembourg.
The most granular PIT structure in the EU. Small income movements between brackets have different marginal consequences at each step. The solidarity surcharge adds a second calculation layer on top of assessed tax.
45% of Luxembourg's workforce are cross-border commuters. French, Belgian, and German frontaliers all have different treaty rules governing where their salary is taxed and how home-country declarations interact with Luxembourg filings.
Luxembourg's holding-company prominence made it a priority jurisdiction for Pillar Two analysis. In-scope MNE groups (EUR 750M+ consolidated revenue) face QDMTT and IIR since 31 December 2023, with UTPR added from 31 December 2024.
Class 1 (single), Class 1a (single with dependants), and Class 2 (married joint) produce materially different tax outcomes. Incorrect class selection creates back-assessment risk. Expats who marry after arriving often fail to apply for Class 2 reclassification.
The participation exemption on dividends and capital gains requires meeting minimum participation thresholds (10% holding or EUR 1.2M acquisition cost) and a 12-month holding period. Substance requirements under EU ATAD and the PPT restrict structures lacking genuine economic activity.
The 80% exemption (5.2% effective rate) under Article 50ter LIR requires qualifying IP meeting OECD nexus ratios. Routine upgrades, trademarks, and non-patented branding don't qualify. Post-BEPS alignment means substance and R&D tracking are mandatory.
Individual crypto gains are only exempt if held over 6 months. Gains from sales within 6 months are ordinary income at progressive rates up to 42% plus solidarity. Accurate timestamp tracking on each acquisition tranche is required for the exemption to hold.
Luxembourg's *Impot sur la fortune* (NWT) applies annually on corporate net wealth at 0.5% above EUR 500M and 0.05% above. This is layered atop IRC plus ICC. Many holding companies use a NWT minimum-reserve credit to partially offset the charge.
Post-2017 tax losses carry forward for a maximum of 17 years. Pre-2017 losses retain indefinite carryforward. Groups acquiring Luxembourg targets with old losses need to verify the vintage before factoring indefinite use into valuations.
When is it time to speak to a Luxembourg Tax-Adviser?
Some filings are straightforward through MyGuichet.lu. Others become complex quickly:
- Income crossing the upper PIT bands (above EUR 50,000+) where 39-42% rates plus the solidarity surcharge apply
- Frontalier workers with income split between Luxembourg and a home country under treaty
- Establishing or operating a SOPARFI, SPF, SICAR, or any Luxembourg fund structure
- IP-licensing arrangements claiming the Article 50ter LIR 80% exemption
- MNE groups in scope for Pillar Two QDMTT / IIR / UTPR
- Cryptoasset disposals where the 6-month threshold is in question
- ACD audit, notice of assessment, or navordering-equivalent back-assessment
- Class-2 married filing reclassification or dependant allowance claims
You can find vetted Luxembourg practitioners through the directory below.
This page provides general information about Luxembourg tax. It is not personal guidance for your specific situation. Tax rules change. Always check current figures on the ACD website (impotsdirects.public.lu) or with a qualified Luxembourg practitioner before filing.
Administration des Contributions Directes — Contribution au Fonds pour l'Emploi.
Frequently asked
Who is the Luxembourg tax authority?
The Administration des Contributions Directes (ACD) administers direct taxes. The Administration de l'Enregistrement, des Domaines et de la TVA (AED) administers VAT and registration duties. Customs fall under the Administration des Douanes et Accises. MyGuichet.lu is the personal e-filing portal. Practitioners are credentialed by the Institut des Reviseurs d'Entreprises (IRE) and the Ordre des Experts-Comptables (OEC).
What is the Luxembourg tax year and when are returns due?
The tax year is the calendar year. Personal IRPP returns are due 31 December of the year following the tax year. Corporate annual IRC returns are due 31 May. VAT returns are filed monthly (above EUR 620,000 turnover) by the 19th of the following month, or quarterly below that threshold. PAYE withholding (RTS) applies monthly.
Who is a Luxembourg tax resident?
Tax residents either maintain domicile or habitual residence in Luxembourg, or are physically present for at least 6 months. Residents are taxed on worldwide income; non-residents on Luxembourg-source income. Three tax classes apply: Class 1 (single), Class 1a (single with dependants), Class 2 (married joint). About 45% of the Luxembourg workforce are cross-border frontaliers subject to bilateral treaty rules.
What are the Luxembourg personal income tax rates?
23 progressive bands from 0% up to 42% top marginal. Class 1 tax-free band up to EUR 12,438. Bands ascend through 8/9/10/11/12/14/16/18/20/22/24/26/28/30/32/34/36/38/39/40/41/42%. Solidarity surcharge of 7% (9% above EUR 150,000 employment income) applies on assessed PIT. CCSS social contributions add approximately 12.45% employee-side. Combined effective top marginal rate approximately 45-48%.
How does Luxembourg corporate tax work?
IRC 17% plus 7% solidarity surcharge plus 6.75% municipal business tax (ICC) in Luxembourg City — combined approximately 24.94%. SOPARFI participation exemption: qualifying dividends and capital gains 95-100% exempt from IRC. IP-box Article 50ter LIR: 80% exemption gives approximately 5.2% effective rate on qualifying IP income. Net Wealth Tax at 0.5/0.05% on corporate net wealth. Pillar Two QDMTT and IIR effective 31 December 2023; UTPR from 31 December 2024. Tax losses carry forward 17 years (post-2017).
What is the Luxembourg TVA (VAT) rate?
Standard TVA rate 17% — EU's lowest standard rate (raised from 16% on 1 January 2024). Intermediate 14%, first reduced 8%, super-reduced 3%. Exports are zero-rated. Registration threshold EUR 35,000 annual turnover. EU OSS and IOSS regimes apply to cross-border digital supplies.
How does Luxembourg tax cryptoassets?
Individual crypto gains on holdings under 6 months are taxable as speculative income at progressive PIT rates up to 42% plus solidarity surcharge. Gains on holdings over 6 months are generally tax-exempt for individual non-business holders. Mining and staking income are commercial or other income depending on regularity. EU MiCA effective 30 December 2024 with CSSF supervising crypto-asset service providers.
How many tax treaties does Luxembourg have?
Approximately 85 active bilateral double-tax conventions. Luxembourg ratified the OECD MLI on 9 April 2019, effective 1 August 2019 for covered treaties. EU founding member since 1957. Euro since 1 January 1999. CRS effective 2017 (banking secrecy eliminated). EU Parent-Subsidiary, Interest and Royalties, and Anti-Tax Avoidance Directives all apply. Standard statute of limitations 5 years; 10 years for fraud.
Major tax firms in Luxembourg
Verified directory of the largest accounting + tax practices operating in Luxembourg. Listings are entity-level reference cards — claim flow is open to firm representatives.
- Big 4
Deloitte Luxembourg
- Big 4
EY Luxembourg
- Big 4
KPMG Luxembourg
- Big 4
PwC Luxembourg
- National
BDO Luxembourg
- National
Forvis Mazars Luxembourg
- National
Grant Thornton Luxembourg
- National
RSM Luxembourg
- Regional
S&A Tax & Audit SA
Find a tax pro in Luxembourg
Browse credentialed pros serving Luxembourg — filter by specialty, language, and credential type.
Browse the Luxembourg directorySources
The figures, dates, and rules on this page are sourced from the documents listed below. Where two sources disagree, both are listed.
- ACD (Luxembourg) · accessed
- Government of Luxembourg · accessed
- Government of Luxembourg · accessed
- Government of Luxembourg · accessed
- Ministry of Finance (Luxembourg) · accessed
- PwC Worldwide Tax Summaries · accessed
- KPMG Tax Insights · accessed
Important disclaimer
Informational only — not tax advice. This page summarises publicly available information about tax in Luxembourg as of July 2026. Tax laws change, individual circumstances vary, and the application of any rule depends on your specific facts.
TaxProsRated does not provide tax, legal, accounting, or financial advice. Before acting on anything you read here, consult a qualified tax professional licensed in your jurisdiction (in the US: CPA, Enrolled Agent, or attorney; in the UK: CIOT- or ATT-qualified adviser; in Australia: TPB-registered tax agent; elsewhere: a locally-licensed equivalent). TaxProsRated, its operators, and its contributors disclaim all liability for action taken in reliance on this page.