Social security contributions
Compulsory social security contributions for employees are listed below:
- For sickness: 3.05% of gross periodic remuneration, which is limited to a monthly ceiling of EUR 11,009.65 (annual ceiling estimated at EUR 132,115.80 as of 1 January 2021).
- For pension: 8% of gross remuneration, which is limited to a monthly ceiling of EUR 11,009.65 (annual ceiling estimated at EUR 131,115.80 as of 1 January 2021).
The social security contributions have to be withheld by the employer from the employee's gross salary.
Certain multilateral and bilateral social security agreements protect the interests of temporarily resident employees.
Employees (residents and non-residents) paying Luxembourg social security contributions are subject to the so-called dependency contribution on their gross professional income, reduced by EUR 550.48 per month (i.e. estimated at EUR 6,605.76 as of 1 January 2021). Net portfolio income and taxable capital gains of Luxembourg resident taxpayers are also subject to the dependency contribution, except for interest within the scope of the 20% withholding tax (WHT) in full discharge of income tax. The dependency contribution rate amounts to 1.4% (flat rate).
Temporary budget tax
The temporary budget tax has been abolished with effect from 1 January 2017.
The crisis contribution has been abolished with effect from 1 January 2012.
Value-added tax (VAT)
Supplies of good and services, which are deemed to take place in Luxembourg from a VAT perspective, are subject to VAT at the standard rate of 17% (lowest standard VAT rate in the European Union [EU]) or, on certain transactions, at 14% (e.g. certain wines, advertising pamphlets, management and safekeeping of securities), 8% (e.g. supply of gas or electricity), or 3% (e.g. food [except alcohol beverages], pharmaceutical products, books, radio and television broadcasting services [except adult entertainment], or shoes, accessories, and clothes designed for children under the age of 14). See the Other taxes section in the Corporate summary for more information.
Net wealth/worth taxes
Wealth taxes have been abolished from 1 January 2006 for individuals (resident and non-resident).
Inheritance, estate, and gift taxes
Indirect taxes apply to inheritances and gifts. These taxes are levied by the Administration de l'Enregistrement et des Domaines.
Inheritance taxes are levied on the whole estate left by an inhabitant of the Grand-Duchy of Luxembourg at the time of their death, except real estate located abroad and movable goods located abroad, which are taxed by reference to the citizenship of the deceased.
A person is deemed to be a Luxembourg inhabitant, and thus liable to inheritance tax, if they have their domicile and the centre of their activities there.
The residence of the heirs has no impact on inheritance taxes due in Luxembourg.
Regarding the inheritance tax rates, each beneficiary is taxed separately based on the value of the net share attributed to them, less personal allowances.
It should be noted that the tax rates differ depending on the degree of relationship between the heir and the deceased.
New measure to simplify successions exempt from inheritance tax
The Bill n°7666 introduces an amendment to the law dated 28 January 1948 on registration and succession duties. The purpose of the measure is to introduce for heirs, in the context of successions exempt from inheritance tax, an efficient means of access to moveable assets of a succession held by a third party (such as credit institutions), by giving a civil scope to the certificate issued by the Luxembourg indirect tax authorities. It is primarily an administrative simplification measure.
The certificate issued by the Luxembourg indirect tax authorities in case of a succession exempt from inheritance tax would therefore henceforth have both fiscal and civil scope. From now on, any third-party holder of moveable property that is part of a succession would be required to accept this certificate as proof of the capacity of the heir that holds the certificate.
Death duties are levied on real estate located in Luxembourg that is left by a person who is not an inhabitant of Luxembourg. No tax is due on movable property located in Luxembourg and owned by a person who is not an inhabitant of Luxembourg. The residence of the heirs has no impact on death duty levied in Luxembourg.
Tax is levied on gifts made during the individual's lifetime (i.e. inter vivos gifts).
A notarial deed is, in principle, required to evidence gifts under Luxembourg law. Gifts that are not required to be made in writing (e.g. gifts on movable assets transferred by hand delivery or dons manuels) are generally accepted without notarial deed and thus without registration. In this case, no tax is due, except if the donor dies within the civil year (the value of the gift is then reintegrated in the transferred estate for the computation of inheritance tax).
Gift taxes are based on a percentage. The percentage duty depends on the degree of relationship between the donor and the donee. For gift tax purposes, the fiscal domicile of the donee and the donor are irrelevant. Moreover, gifts of immovable property may be subject to an additional transfer duty of 1% (droit de transcription).
Inter vivos gifts to direct line heirs, which qualify as ancestors' partition (partage d'ascendants), are exempt from transfer duty.
Luxembourg municipalities levy a property tax and are responsible for the final tax assessment. The property tax is calculated using the following formula: Tax base x communal rate.
The tax base corresponds to the unitary value assigned by the property assessment department of the tax authorities (called 'section des évaluations immobilières') multiplied by the assessment rate (between 0.7% and 10%).
The communal rate is fixed annually by the municipalities and varies between 105% and 1,250%, depending on the location and category of the property.
Luxury and excise taxes
There are no luxury and excise taxes applicable to individuals in Luxembourg.