Tax guide: personal income tax

Taxation is a fundamental aspect of Luxembourg’s economic system. Known for its robust economy and favorable tax environment, Luxembourg has developed an attractive tax system.

Here you will find an overview of the tax system in Luxembourg and the various types of taxes that apply to individuals, including the main one: income tax.

Basic Principles of Personal Income Tax in Luxembourg

Who is liable for income tax in Luxembourg?

In Luxembourg, individuals—whether tax residents or non-residents—are liable for tax as long as they receive income, regardless of its source, category, or method of collection.

While you are liable for tax regardless of your tax status, the tax treatment of individuals differs depending on whether you are a resident or a non-resident. Tax residents are taxed on their worldwide income, while non-residents are taxed only on income from Luxembourg sources.

After deductions and tax credits, according to the latest income tax schedule, individuals with income below 13,200 euros are not liable for tax.

Above this income threshold, all employees and pensioners are liable for income tax.

What types of income are subject to tax?

• Employment income, whether from wages or self-employment
• Pensions
• Rent and other real estate income
• Financial income, interest, and dividends
• Capital gains (e.g., from the sale of real estate)
• Other miscellaneous income.

Tax deductions and credits

The amount of tax is calculated based on the amount of income received and tax deductions that reduce the taxable base.

Taxpayers may be eligible for various deductions and tax credits, including:

• deduction for dependent children,
• deduction for childcare expenses,
• deduction for retirement savings and supplemental life insurance,
• tax credits for expenses related to vocational training or specific home improvements.

Learn more about tax deductions.

Withholding tax or tax return?

Wages and pensions are withheld directly at source by the employer. The employee receives only a net wage, after tax has been deducted, based on a withholding tax form—see below.

Even if tax is withheld at source, an annual tax return may be required to:

• adjust credits or deductions not applied at the source,
• report additional income (rental income, dividends, capital gains),
• optimize the calculation of the household’s total tax liability.

Households with taxable income exceeding 100,000 euros per year or income from sources other than employment must file an annual tax return with the tax authorities.

Learn more about individual income tax returns in Luxembourg.

Tax brackets

Taxpayers are classified according to their family and personal circumstances:

• Class 1: single, widowed, or divorced individuals with no dependent children
• Class 1a: single or widowed individuals living alone, over 65 years of age, or disabled
• Class 2: married couples or partners in a registered partnership

More information on tax brackets.

Tax rates: how much is the income tax?

Luxembourg’s income tax system is progressive.

The progressive income tax rate ranges from 0% to 42%. The highest tax bracket in Luxembourg is 42% and applies to income exceeding €234,900 annually in 2025.

There is a distinction between the marginal tax rate—which applies to the highest income bracket—and the average tax rate—which applies to your total income.

You can find a tax calculator on the Ministry of Finance’s website to estimate your tax liability based on your income.

Withholding tax and tax withholding form

In Luxembourg, income tax is withheld directly at source by your employer or pension provider.

Each taxpayer receives a tax withholding form, or “tax card,” which determines the tax bracket based on their family and personal circumstances.

It is essential to provide this form to your employer as soon as you receive it so that the withholding tax is calculated correctly. If your circumstances change (marriage, birth, new job, etc.), you must update your information to adjust the withholding.

Is this your first job in Luxembourg? You will receive your tax card as follows:

• If you are a resident and a resident taxpayer, you will receive your tax card directly without any action on your part. In fact, the Direct Tax Administration issues the tax card after your new employer registers you with the CCSS. You will receive your tax card within a maximum of 30 business days.
• If you are an employee and a non-resident (cross-border worker), you must request your tax withholding form as soon as you start your job. To do so, you must contact the RTS non-resident office in Luxembourg. In subsequent years, you will automatically receive a form to complete for the issuance of future tax withholding forms.

Do you have an upcoming job interview or salary negotiation? Negotiate your salary based on your net income, after deducting the expected taxes.