Tax (Impôt)

What is ‘tax (impôt)’? - ‘Tax (impôt)’ refers to a financial charge or levy imposed by a government on individuals or entities to fund public services and government operations. Taxes can be levied on income, property, sales, and various other transactions. In Luxembourg, the tax system is designed to ensure that the government has the necessary revenue to provide services like healthcare, education, and infrastructure.

What are the different types of taxes in Luxembourg? - In Luxembourg, taxes can be categorized into direct and indirect taxes:

Who is required to pay taxes? - All residents and individuals earning income in Luxembourg are required to pay taxes, including both citizens and foreign nationals. Companies operating in Luxembourg are also subject to corporate tax.

How are taxes calculated? - Taxes are generally calculated based on a percentage of income, profits, or the value of property. For individuals, the income tax is progressive, meaning higher income is taxed at higher rates.

What happens if I don’t pay my taxes? - Failure to pay taxes can result in penalties, interest on the unpaid amount, and legal action. In Luxembourg, the Administration des Contributions Directes enforces tax collection and compliance.

What is income tax (impôt sur le revenu)? - In Luxembourg, the ACD oversees the collection of income tax, which is progressive and based on individual or household income. Tax brackets depend on personal circumstances such as marital status and number of dependents.. This is a direct tax levied on individuals' income, including wages, salaries, and other earnings. It is progressive, with rates ranging from 0% to 42% (2024), depending on the income level and tax class.

What is payroll tax (impôt sur le salaire)? – This is a direct tax levied on individual’s salaries, which varies on individual criterias.

What is the corporate tax? - Companies registered in Luxembourg are required to pay corporate tax, which the ACD calculates based on profits. The corporate tax rate varies depending on the company’s revenue.

What is tax residency? - The ACD determines whether an individual or company is a tax resident in Luxembourg, which affects their tax obligations. Luxembourg residents are taxed on their global income, while non-residents are taxed only on their Luxembourg-sourced income.

What is wealth tax (impôt sur la fortune)? - Luxembourg levies a wealth tax on individuals with net assets exceeding a certain threshold. This tax is calculated based on the total value of an individual's assets.

What is value-added tax (VAT)? - An indirect tax applied to the sale of goods and services. The standard VAT rate in Luxembourg is 17%, with reduced rates for specific goods and services.

Are there tax benefits and deductions in Luxembourg? - Luxembourg offers various tax benefits and deductions for individuals and businesses, including allowances for dependents, home loan interest, and charitable contributions, which can reduce the overall tax burden.

What is a tax refund? - If too much tax has been paid during the year, the ACD will issue a refund after the tax return has been processed. This is common for employees who have had too much tax withheld from their paychecks.

Synonyms: Levy, taxation, duty, fiscal charge