Tax Classes (Classes d'impot)
Luxembourg assigns every taxpayer to one of three tax classes, which determines the applicable tax rate schedule and certain deduction thresholds. Your tax class is the single most important factor in your tax calculation.
| Class |
Who Qualifies |
Key Benefit |
| Class 1 |
Single taxpayers without children; divorced (without children or more than 3 years post-divorce); separated |
Standard progressive rates apply |
| Class 1a |
Single taxpayers aged 65+; widowed; single parents with dependent children; divorced within 3 years of divorce |
More favorable rate schedule than Class 1 |
| Class 2 |
Married couples / civil partners (PACS) filing jointly; widowed (year of death + following year); divorced (year of divorce only) |
Income splitting — combined income divided by 2, taxed on half, tax doubled. Major benefit for unequal earners. |
Legal Basis
- Art. 119 LIR — Defines Class 1 (single taxpayers)
- Art. 119bis LIR — Defines Class 1a (single parents, elderly, widowed)
- Art. 120 LIR — Defines Class 2 (married/PACS, collective taxation)
- Art. 121 LIR — Rules for change of class during the year
- Art. 157ter LIR — Non-resident assimilation (allows non-residents to access Class 2 if 90%+ income is from Luxembourg)
Tax Brackets & Rates (Bareme de l'impot 2025)
Luxembourg applies a progressive income tax with 22 brackets. Rates range from 0% to 42%. An additional employment fund surcharge (contribution au fonds pour l'emploi) is applied on top.
| Taxable Income (EUR) |
Marginal Rate |
| 0 – 11,265 | 0% |
| 11,265 – 13,173 | 8% |
| 13,173 – 15,081 | 9% |
| 15,081 – 16,989 | 10% |
| 16,989 – 18,897 | 11% |
| 18,897 – 20,805 | 12% |
| 20,805 – 22,713 | 14% |
| 22,713 – 24,621 | 16% |
| 24,621 – 26,529 | 18% |
| 26,529 – 28,437 | 20% |
| 28,437 – 30,345 | 22% |
| 30,345 – 32,253 | 24% |
| 32,253 – 34,161 | 26% |
| 34,161 – 36,069 | 28% |
| 36,069 – 37,977 | 30% |
| 37,977 – 39,885 | 32% |
| 39,885 – 41,793 | 34% |
| 41,793 – 43,701 | 36% |
| 43,701 – 45,609 | 38% |
| 45,609 – 100,002 | 39% |
| 100,002 – 150,000 | 40% |
| 150,000 – 200,004 | 41% |
| Over 200,004 | 42% |
Employment Fund Surcharge
An additional surcharge is applied on the calculated tax:
- 7% surcharge for taxable income up to EUR 150,000
- 9% surcharge for taxable income exceeding EUR 150,000
This means the effective top marginal rate is 42% x 1.09 = 45.78%.
Class 2 Income Splitting
For married couples (Class 2), the combined income is divided by 2, the tax is computed on this half, and then the resulting tax is doubled. This significantly benefits couples with unequal incomes.
Legal Basis
- Art. 118 LIR — Progressive tax rate schedule
- Art. 120 LIR — Collective taxation and income splitting for Class 2
- Loi budgetaire 2025 — Annual bracket adjustments
Categories of Taxable Income
Luxembourg tax law (LIR) recognizes 8 categories of net income. Your total taxable income is the sum of all categories after applying category-specific deductions.
1
Commercial / Business Profits (Benefice commercial)
Profits from commercial activities, trades, and business operations. Art. 14-60 LIR
2
Agricultural & Forestry Profits (Benefice agricole et forestier)
Income from farming, agriculture, and forestry activities. Art. 61-76 LIR
3
Liberal Professions (Benefice des professions liberales)
Income from independent professional activities: doctors, lawyers, consultants, architects, etc. Art. 91 LIR
4
Employment Income (Revenu d'une occupation salariee)
Salaries, wages, bonuses, benefits in kind from salaried employment. This is the most common category. Art. 95 LIR
5
Pension & Annuity Income (Revenu de pensions ou de rentes)
State and private pensions, annuities, survivor benefits. Art. 96 LIR
6
Investment Income (Revenu de capitaux mobiliers)
Dividends, interest, and other returns from financial investments. Note: interest subject to RELIBI (20% withholding) is exempt from declaration. Art. 97 LIR
7
Rental Income (Revenu de la location de biens)
Net income from renting immovable property (real estate). Art. 98 LIR
8
Miscellaneous Income (Revenus divers)
Capital gains on real estate, speculative gains on securities (sold within 6 months), and other occasional income. Art. 99-102 LIR
Employment Income
Employment income includes all compensation received from salaried work: gross salary, bonuses (including 13th month), benefits in kind (company car, housing), stock options, and overtime supplements.
Overtime Exemptions
Overtime pay supplements are partially exempt from income tax. The exempt portion depends on the type and amount of overtime worked.
Meal Vouchers (Cheques-repas)
Employer-provided meal vouchers are exempt from tax up to EUR 10.80 per day worked.
Legal Basis
- Art. 95 LIR — Definition of employment income
- Art. 95a LIR — Benefits in kind valuation
- Art. 115 LIR — Overtime exemptions
Pension & Annuity Income
Pensions and annuities are fully taxable as income. This includes state pensions (CNAP), company pensions, private pension plan distributions, and survivor benefits.
Pensioner Tax Credit (CIP)
Pensioners receive an annual tax credit (Credit d'Impot Pensionne) of up to EUR 696/year, which is automatically applied.
Legal Basis
- Art. 96 LIR — Taxation of pensions and annuities
- Art. 139bis LIR — Pensioner tax credit (CIP)
Self-Employment & Business Income
Self-employed individuals are taxed on their net business profits (revenue minus business expenses). This applies to commercial businesses, liberal professions, and agricultural activities.
Quarterly Advance Payments
Self-employed taxpayers must make quarterly advance tax payments (avances trimestrielles) on March 10, June 10, September 10, and December 10.
Legal Basis
- Art. 14-60 LIR — Commercial profits
- Art. 61-76 LIR — Agricultural/forestry profits
- Art. 91 LIR — Liberal professions
Investment & Capital Income
Investment income includes dividends, interest, and other capital returns.
Dividend Exemption
A 50% exemption applies to dividends: only half of gross dividend income is included in taxable income.
RELIBI - Withholding Tax on Interest
Luxembourg applies a 20% final withholding tax (RELIBI) on domestic interest income paid to residents. This is a final tax — the interest need not be declared on the tax return.
Capital Gains on Securities
- Securities held more than 6 months: generally exempt (unless substantial participation ≥10%)
- Securities sold within 6 months: taxed as speculative gains under miscellaneous income
Legal Basis
- Art. 97 LIR — Investment income
- Art. 115(15a) LIR — 50% dividend exemption
- Loi RELIBI — Withholding tax on interest
Rental Income
Net rental income from immovable property is taxable. Deductible expenses include mortgage interest, maintenance costs, depreciation, insurance, and property management fees.
Capital Gains on Real Estate
Capital gains on the sale of real estate are taxed at half the global rate if the property was held for more than 2 years. Principal residence sales may be partially or fully exempt.
Legal Basis
- Art. 98 LIR — Rental income
- Art. 99-99ter LIR — Capital gains on real estate
- Art. 98bis LIR — Mortgage interest deduction on principal residence
Social Security Contributions
Employees in Luxembourg contribute to three mandatory social security schemes. These contributions are fully deductible from gross income for tax purposes.
| Contribution |
Employee Rate |
Employer Rate |
Ceiling (Monthly) |
| Health Insurance (Assurance maladie-maternite) |
3.05% |
3.05% |
5x SSM (~EUR 13,436/mo) |
| Pension Insurance (Assurance pension) |
8.00% |
8.00% |
5x SSM (~EUR 13,436/mo) |
| Long-term Care (Assurance dependance) |
1.40% |
N/A |
No ceiling (all income) |
Total Employee Contribution
Approximately 12.45% of gross salary (health + pension + long-term care). The annual ceiling for health and pension contributions is approximately EUR 161,232 (5 x SSM x 12 months).
Legal Basis
- Code de la Securite Sociale (CSS) — Art. 28, 171, 376
- CCSS — Centre Commun de la Securite Sociale administers collection
Employment-Related Deductions (Frais d'obtention)
Employees can deduct expenses directly related to earning their employment income.
| Deduction |
Amount |
| Minimum lump-sum (forfait) |
EUR 480/year (automatic if no higher expenses claimed) |
| Travel expenses (frais de deplacement) |
EUR 99 per distance unit; maximum EUR 2,574/year |
| Actual professional expenses |
Tools, training, work clothing, etc. (if exceeding lump-sum) |
Legal Basis
- Art. 105 LIR — Frais d'obtention (employment expenses)
- Art. 105bis LIR — Lump-sum deduction
- RGD travel deduction rules — Distance-based calculation
Special Expenses (Depenses Speciales)
Special expenses are personal expenditures that the tax law allows as deductions from total income.
| Expense |
Annual Limit |
| Minimum lump-sum |
EUR 480 (Class 1/1a) or EUR 960 (Class 2) |
| Insurance premiums (life, health, accident, liability) |
EUR 672 per person in household |
| Personal loan interest (consumer credit) |
EUR 672 per person in household |
| Supplementary pension (Art. 111bis) |
EUR 3,200 per year |
| Home savings scheme (Bausparvertrag) |
EUR 672 per person in household |
| Charitable donations |
Deductible if total > EUR 120; max 20% of income or EUR 1,000,000 |
Legal Basis
- Art. 109(1) LIR — Minimum special expenses deduction
- Art. 111 LIR — Insurance premiums
- Art. 111bis LIR — Supplementary pension contributions
- Art. 112 LIR — Charitable donations
Housing & Mortgage Deductions
Mortgage interest on your principal residence (habitation personnelle) is deductible. The maximum deduction depends on how long you have occupied the property.
| Occupation Period |
Max Deduction (per person in household) |
| First 5 years (years 1-5) |
EUR 2,000 |
| Next 5 years (years 6-10) |
EUR 1,500 |
| Thereafter (year 11+) |
EUR 1,000 |
Legal Basis
- Art. 98bis LIR — Deduction of mortgage interest on principal residence
Extraordinary Charges (Charges Extraordinaires)
These are exceptional personal expenses that exceed a "normal burden" threshold. The deductible amount is the portion that exceeds what is considered a normal expenditure for your income level.
| Charge |
Annual Limit |
| Childcare costs (children under 14) |
EUR 5,400 per child per year |
| Domestic help / housekeeper |
EUR 5,400 per year |
| Alimony paid to ex-spouse |
EUR 24,000 per year |
| Disability-related expenses |
EUR 150 – EUR 735 lump sum (by degree) |
Legal Basis
- Art. 127 LIR — Definition of extraordinary charges
- Art. 127bis LIR — Childcare and domestic help
- Art. 128 LIR — Normal burden threshold
- Art. 129 LIR — Alimony deduction
Tax Credits
Tax credits directly reduce the amount of tax you owe (unlike deductions, which reduce taxable income).
| Credit |
Amount |
Eligibility |
| CIS — Credit d'Impot Salarie |
Up to EUR 696/year |
Employees (phased in/out based on income) |
| CIP — Credit d'Impot Pensionne |
Up to EUR 696/year |
Pensioners (phased in/out based on income) |
| CIM — Credit d'Impot Monoparental |
EUR 1,500/year |
Single parents in Class 1a |
CIS/CIP Phase-In and Phase-Out
The employee (CIS) and pensioner (CIP) tax credits are automatically applied by employers/pension funds. They are phased in for low incomes and phased out for incomes above approximately EUR 79,999.
Legal Basis
- Art. 139bis LIR — Employee tax credit (CIS)
- Art. 139bis LIR — Pensioner tax credit (CIP)
- Art. 139c LIR — Single-parent credit (CIM)
Filing Process & Deadlines
Who Must File?
Taxable income exceeds EUR 100,000/year
Multiple sources of Luxembourg employment income
Class 2 (married) where non-working spouse earns more than EUR 13,000
Foreign income exceeding EUR 600
Non-withheld investment income exceeding EUR 1,500
Non-resident who elected resident taxation
Received a tax return from ACD to complete
Filing Deadline
March 31, 2026 for tax year 2025. Extensions may be requested. Online filing is available via MyGuichet.lu (requires LuxTrust or eIDAS authentication).
Legal Basis
- Art. 153 LIR — Obligation to file
- Art. 154 LIR — Filing deadlines
Cross-Border Workers (Frontaliers)
Residents of Belgium, France, and Germany who work in Luxembourg are subject to Luxembourg income tax on their Luxembourg-source employment income.
Home Working Thresholds (Post-COVID Agreements)
- France: up to 34 days of home working without losing Luxembourg taxation
- Germany: up to 34 days
- Belgium: up to 34 days
Days beyond these thresholds are taxable in the country of residence.
Non-Resident Assimilation (90% Rule)
Non-residents can elect to be treated as residents (Art. 157ter LIR) if 90% or more of their worldwide income is taxed in Luxembourg. This grants access to Class 2, all deductions, and tax credits.
Legal Basis
- Art. 157ter LIR — Non-resident assimilation
- Double Tax Treaties — Conventions with Belgium, France, Germany
- Bilateral home-working agreements — Effective 2024+
Official Tax Forms
| Form |
Purpose |
| Modele 100 |
Annual personal income tax return (residents) |
| Modele 100F |
Simplified tax return (residents, less complex situations) |
| Modele 163 |
Annual income tax return (non-residents) |
| Modele 163NR |
Non-resident request for resident assimilation |
| Modele 101bis |
Withholding tax adjustment request |
| Certificat de remuneration |
Annual salary certificate from employer |
| Modele 100D |
Supplementary form for real estate income |
Official Sources & Links
Administration des Contributions Directes (ACD)
The Luxembourg tax authority. Official tax forms, baremes, circulars, and guidance.
impotsdirects.public.lu
Guichet.lu
Luxembourg government services portal. Comprehensive tax guides for citizens.
guichet.public.lu
Legilux
Official legal gazette. Full text of the LIR and all tax legislation.
legilux.public.lu
Centre Commun de la Securite Sociale (CCSS)
Social security administration. Contribution rates and ceilings.
ccss.public.lu
Primary Legislation
- Loi modifiee du 4 decembre 1967 concernant l'impot sur le revenu (LIR) — The main income tax law
- Reglement grand-ducal (RGD) d'execution — Implementing regulations
- Loi budgetaire annuelle 2025 — Annual budget law with rate/threshold adjustments
- Code de la Securite Sociale (CSS) — Social security law