Most people arrive in Luxembourg thinking about rent and forget that the tax office has been watching since the moment they signed a contract. The good news is that for an employee, income tax in Luxembourg is largely handled for you. The less good news is that the details depend on your family situation, your old country and the day you arrived.
Who pays income tax in Luxembourg?
You are a tax resident if your tax domicile or your habitual residence is in the Grand Duchy. Residents are taxed on all their income, Luxembourg and foreign. Non-residents, such as people who live in France, Belgium or Germany and work in Luxembourg, are normally taxed only on their Luxembourg income, unless they opt for treatment as a resident (see cross-border workers in Luxembourg).
The year you arrive is special. The convention on double taxation between Luxembourg and your former country decides who taxes what in the year you move and on any income that stays behind, such as rent from a flat at home. Luxembourg has such a convention with every EU country, the United Kingdom (Scotland included) and Switzerland; the ACD publishes the list. Keep a record of the day you left and the day you arrived.
What are the rates for income tax in Luxembourg?
The scale in force since tax year 2025 was published in the Mémorial A N° 590 of 24 December 2024 and remains in force in 2026 (article 118 of the income tax law). For a person in class 1:
- 0% up to €13,230 of taxable income;
- then slices of about €2,200 to €2,300 taxed at 8%, 9%, 10%, 11%, 12%, then 14%, 16% and so on up to 38% (the slice that ends at €54,090);
- 39% from €54,090 to €117,450;
- 40% up to €176,160;
- 41% up to €234,870;
- 42% above that.
Each rate applies only to the part of income inside its slice, so crossing a threshold does not tax the whole salary at a higher rate. Class 2 (couples taxed jointly) applies the scale to household income more favourably, and class 1a covers widowed people, people who receive a tax reduction for a child and people aged 64 or over at the start of the year. Our guide to Luxembourg tax classes explains who is where.
An employment fund contribution is added to the tax: 7% of the tax, or 9% above €150,000 of adjusted taxable income for classes 1 and 1a (€300,000 for class 2), says the ACD. Social security contributions are separate and come out of your payslip as well.
How does the tax card work?
For an employee, tax is withheld at source on the basis of your fiche de retenue d'impôt. It is issued automatically by the ACD after you are affiliated to social security, in about 30 working days on average. Without it, the law (article 143) makes your employer withhold at the most expensive rates, unless the ACD grants an exemption. If it has not arrived within 30 working days of your first day, contact the competent RTS office (the ACD's withholding-tax office) and tell your employer.
If you have income from your old country, a partner with a different situation or an employer abroad, the picture can quickly become more than a tax card. Moovy can lay out the official rules for your case and the questions to put to a tax adviser. It does not file your return or give a tax opinion; it prepares you.
Do you have to file a return?
The form is the modèle 100, filed through MyGuichet.lu (as a PDF or with the electronic assistant) or by post to the tax office. The deadline is 31 December of the year that follows the tax year. For 2025 income, filing is open from 7 April to 31 December 2026, according to Guichet.lu. An employee can also ask for a correction through a return or an annual adjustment (décompte annuel, form 163 R) to recover deductions: insurance, interest, pension savings, childcare costs and others. The ACD sets the thresholds that make a return compulsory, so ask or check its website each year.
One practical trap: you cannot sign a tax return with a foreign electronic ID on MyGuichet.lu. Plan a LuxTrust or GouvID route, or use the paper form.
What is the impatriate regime?
If you are recruited directly abroad by a Luxembourg employer (or an employer in the EEA), or seconded by an international group, the law (article 115, no. 13b of the income tax law, text at 1 January 2026) exempts 50% of the gross annual remuneration, with the base capped at €400,000. Key conditions:
- you are a tax resident of Luxembourg;
- in the five tax years before arrival you were not tax-domiciled in Luxembourg, did not live within 150 km of its border and were not taxed in Luxembourg on professional income;
- you spend at least 75% of your working time on the activity concerned;
- your fixed gross annual pay is at least €75,000;
- you do not replace an employee who is not an impatriate;
- a recruited employee needs in-depth specialisation in the sector; a seconded one needs five years in the group or in the specialist field, a right to return and a secondment contract;
- impatriates must not exceed 30% of the company's workforce (not required for companies under ten years old).
The exemption lasts for the assignment and no later than the end of the eighth tax year after the year you started, and stops as soon as a condition is no longer met. The employer manages it and reports names to the ACD by 31 January. Someone who already benefited under the version in force up to 2024 stays under it while its conditions are met, unless they expressly ask for the new version, a choice that is then irrevocable.
Note the 150 km rule: if you lived in the border region of France, Belgium or Germany before taking the job, you will not qualify.
What else do new residents trip over?
- Foreign income. As a resident you declare it, even if it is exempt in Luxembourg, because it can set your rate.
- Property. Owners pay a communal property tax (impôt foncier), with a rate set by each commune; ask yours for the rate that applies this year.
- Changing address. Report it to your commune so your card keeps up.
- Deadlines. The return is due by 31 December of the following year, and the tax office can add a surcharge or late interest if you miss a deadline it has set.
For retirees whose pensions come from abroad, see retiring in Luxembourg. For the money side of settling, read the cost of living in Luxembourg.
How does the double taxation treaty work for you?
A double taxation treaty is an agreement between two countries that decides which one may tax each kind of income, so that you are not taxed twice on the same euro. Luxembourg has one with every EU country, the United Kingdom and Switzerland. In practice the treaty decides several things for a new arrival: the year of the move, a pension paid from your old country, rent from a property you keep, and work done partly abroad. The article on pensions in each treaty is different, so a retiree should read the one that concerns them, as we explain in retiring in Luxembourg.
For salaried work, the treaty is also why the 34-day rule exists for people who live in France, Belgium or Germany and work in Luxembourg. That rule is not for residents: once you live in Luxembourg, you are a resident and your whole salary is taxed here, whatever the old country says.
Is it worth asking for help?
For a simple employee in a single country, the tax card and a short return may be enough. If you have income in two countries, a company, rental property abroad or a recruitment package that mentions the impatriate regime, have a tax adviser or accountant in Luxembourg check your situation before you sign or file. One meeting costs less than a year of wrong withholding.
Tax rules change. The scale and surcharge quoted here apply to 2026; check impotsdirects.public.lu before relying on them.