Income (in EUR) | Tax Rate

12,439 to 14,508 | 8%

14.509 to 16.758 | 9%

16,759 to 18,648 | 10%

18,649 to 20,718 | 11%

20,719 to 22,788 | 12%

22,789 to 24,939 | 14%

24,940 to 27,090 | 16%

27.091 to 29.241 | 18%

29.242 to 31.392 | 20%

31.393 to 33.543 | 22 %

33,544 to 35,694 | 24%

35,695 to 37,845 | 26%

37,846 to 39,996 | 28%

39,997 to 42,147 | 30%

42,148 to 44.298 | 32 %

44,299 to 46,449 | 34%

46,450 to 48,600 | 36%

48.601 to 50.751 | 38 %

50.752 to 110.403 | 39 %

110.404 to 165.600 | 40%

165.601 to 220.788 | 41 %

over 220,788 | 42%

Assets (in EUR) | Minimum Wealth Tax (in EUR)

up to 350,000 | 535

between 350,001 and 2,000,000 | 1,605

between 2,000,001 and 10,000,000 | 5,350

between 10,000,001 and 15,000,000 | 10,700

between 15,000,001 and 200,000,000 | 16,050

between 200.000.001 and 300.000.000 | 21.400

over 300,000,000 | 32,100

Assets (in EUR) | Minimum Wealth Tax (in EUR)

up to 350,000 | 535

between 350,001 and 2,000,000 | 1,605

over 2,000,000 | 4,815

Share of sustainable investments | annual tax rate

over 5% | 0.04%

between 20% and 35% | 0.03%

between 35% and 50% | 0.02%

over 50% | 0.01%

class | type of real estate

B1 | commercial real estate (land and buildings)

B2 | mixed-use buildings

B3 | Building for other use

B4 | Single-family houses, apartment buildings

B5 | undeveloped land (exception: B6)

B6 | undeveloped land under construction for residential purposes

Relationship | Tax rate to gift tax

in a straight line (parents, children, grandparents, grandchildren) | 0%, 1.8% or 2.4%

Spouses and registered civil partnerships existing for at least 3 years | 4.8%

Siblings | 6%

between uncle/aunts and nieces/nephews | 8.4%

between parents-in-law and daughter-in-law/son-in-law | 8.4%

between great uncles / great aunts and great nieces / great nephews | 9.6%

for other relationships and under third parties | 14.4%

Gifts to foundations, educational institutions, university scholarships | 0 %

Gifts to public institutions and municipalities as well as recognized charitable, social, religious and other institutions and assets | 4.8%

Relationship | Basic rate legal share

in straight line | 0 %

Spouses and registered civil partnerships existing for at least 3 years | 0 %

Siblings | 6%

between uncle/aunts and nieces/nephews | 9%

between adoptive parents and children | 9%

between great uncles / great aunts and great nieces / great nephews | 10%

between adoptive parents and the children of their adoptive children | 10%

all other constellations | 15%

Asset (EUR) | Additional Rate

10,000 to 20,000 | 1/10

20,000 to 30,000 | 2/10

30,000 to 40,000 | 3/10

40,000 to 50,000 | 4/10

50,000 to 75,000 | 5/10

75,000 to 100,000 | 6/10

100,000 to 150,000 | 7/10

150,000 to 200,000 | 8/10

200,000 to 250,000 | 9/10

250,000 to 380,000 | 12/10

380,000 to 500,000 | 13/10

500,000 to 620,000 | 14/10

620,000 to 750,000 | 15/10

750,000 to 870,000 | 16/10

870,000 to 1,000,000 | 17/10

1,000,000 to 1,250,000 | 18/10

1,250,000 to 1,500,000 | 19/10

1,500,000 to 1,750,000 | 20/10

over 1,750,000 | 22/10

Luxembourg has often been called a tax haven in the middle of Europe in the past. But is that really true? We analyse which provisions of tax law in Luxembourg are familiar with regard to the most important taxes: income tax, corporate tax, business tax, sales tax, property tax as well as inheritance tax and gift tax.

1st Taxation in Luxembourg – Introduction

Luxembourg is a relatively small country in Central Europe. In addition, it is one of the few in the world that does not lie on any sea coast. But unlike most other countries in such a geographical position, this has no impact on the economic situation. On the contrary, Luxembourg is one of the states in the European Union with the most solid economic strength. The fact that Luxembourg is an important administrative seat for EU institutions has certainly contributed to this. For example, the European Court of Justice (ECJ) has its seat there. But Luxembourg also plays an important role as an important international financial centre. And the fact that Luxembourg is located in a region in whose catchment area a great many people live and work in wealthy nations has certainly contributed to this.

This fits another characteristic that Luxembourg likes to attribute. Because in the media there is always the claim that Luxembourg is actually a tax haven. In part, this was also understandable because Luxembourg provided a preferential tax regime for international IP box designs for many years. In addition, the tax administration in Luxembourg was struck by the fact that it had partly adopted unchanged draft tax rulings from the ranks of the Big Four, who used their clients. We therefore wonder whether Luxembourg is actually a tax haven. Our detailed analysis now gives an answer.

2nd General about Luxembourg

2.1. Luxembourg geographically

A typical low mountain landscape in the heart of Central Europe: rolling hills, forests, agriculture and forestry. In between, isolated hamlets, small towns. An idyllic contrast to the great capital of Luxembourg. Whereby large can only be meant relatively. Because in the whole country live only about 650,000 inhabitants, of which with about 130,000 the most in the capital. These figures alone make it clear that Luxembourg is a small state.

2.2 History of Luxembourg

More specifically, Luxembourg is even a monarchy, albeit a constitutional one. This is the real name of the Grand Duchy of Luxembourg. It all started in 963 with a count who built a castle on a rocky outcrop. Later in the Middle Ages, the county became a duchy that became part of the Holy Roman Empire. Due to its central location in Central Europe, it was constantly threatened militarily by its neighbors. Over time, ever stronger fortifications were created, some of which have been preserved to this day.

This is not a matter of course. After the French Revolution and the conquest of Napoleon Bonaparte, Luxembourg first acquired the status of Grand Duchy during the Vienna Conference. Although it was ruled by the King of the Netherlands, at the same time it was also attributed to the German Confederation, so that a Prussian garrison moved there. This in turn displeased France. So Napoleon III tried. Buy Luxembourg from the Netherlands. This led to the Luxembourg crisis, for which in 1867 the Second Treaty of London found the eternal neutrality of Luxembourg as a solution. The troops withdrew, but at the same time the main fortifications were also removed. Since then, Luxembourg has been an independent state.

A few decades later, Luxembourg entered a new era. After the Dutch King Wilhelm III. Died in 1890 and no heir to the throne from this house could succeed as Grand Duke of Luxembourg, the land fell to the old noble family of Nassau-Weilburg. From this emerges the nobility title now renamed Nassau-Luxemburg.

Despite its neutrality, Luxembourg was attacked by Germany twice. Therefore, Luxembourg has left its neutrality and joined NATO with its newly created military. After the alliance with Belgium and the Netherlands for the Benelux Union, they joined the European Community, which finally gave rise to the present EU.

Taxation in Luxembourg: General information on tax law

First of all: tax law in Luxembourg has many parallels to German tax law. However, this is also due to the fact that Luxembourg has a classic tax law, as is typical for many states in Europe.

Luxembourg: World Income Taxes

Luxembourg levies taxes on income earned both at home and abroad. Total income is crucial. However, one of the manifold double taxation treaties (DTAs), which generally follow the OECD model agreement, may apply in the case of foreign relations.

3.2. Tax liability of natural persons in Luxembourg

In Luxembourg you are subject to unlimited income tax if you have a residence in the country for a period of six months. Shorter interruptions, for example for business trips or holidays abroad, are irrelevant. In contrast to German tax law, however, the residence must actually be used to trigger the tax liability. However, what seems quite familiar to us is that a six-month stay without residence leads to tax liability in Luxembourg.

In addition to the unlimited, there is also a limited tax liability. It allows Luxembourg to collect taxes on domestic income.

3.3. Statutory assessment period

Tax assessment period in Luxembourg is the calendar year. The income tax return must be submitted by 31.12. of the following year. Taxpayers who do not pay payroll tax are subject to a quarterly tax advance based on the previous year’s income tax. In this respect, too, tax law in Luxembourg is similar to German law.

3.4. Types of income in Luxembourg

In Luxembourg, tax law has eight types of income: