Living in Luxembourg: taxation and tax residency

In Luxembourg, an individual is considered a tax resident if they have their tax domicile or habitual residence there. Residents are taxed on both their domestic and foreign income, while non-residents are taxed only on their Luxembourg income. The highest income tax bracket, applicable from 2025, is 42 % for taxable income exceeding €234,870, before contributions to the employment fund. Wealth tax was abolished in 2006 for individuals. These rules originate from the Luxembourg Inland Revenue (Administration des contributions directes) and the guichet.lu portal, some pages of which are outdated; the dates are specified.

Who is a tax resident in Luxembourg?

According to the Luxembourg Inland Revenue (page updated on September 23, 2024), an individual is considered a resident taxpayer if they have their tax domicile or habitual residence in the Grand Duchy of Luxembourg. If they have neither, they are considered a non-resident if they have taxable income there.

Two points of clarification from the same page. A Luxembourg residence permit does not automatically make someone a tax resident. And the page does not mention a six-month threshold.

The principle of taxation follows this distinction. According to another page from the tax authorities (updated March 9, 2017, therefore outdated), residents are taxed on both their domestic and foreign income, while non-residents are taxed only on their Luxembourg-sourced income. For a French citizen, being a resident of Luxembourg then raises the question of residency on the French side: see our page "Leaving France for Luxembourg".

The income tax rate

The tax authorities have published a basic tax rate applicable from the 2025 tax year (page updated on January 17, 2025). It ranges from 0 % up to €13,230 of taxable income to 42 % above €234,870. It comprises 23 tax brackets. This rate is the tax before the contribution to the employment fund. Some key points are provided on the page:

The first exempt bracket is €13,230 per tax year, and €26,460 for tax classes 1a and 2. This rate is for taxpayers in class 1. The intermediate brackets, which the page presents in table form, and the tax classes are not reproduced here: they are read at source.

The contribution to the employment fund

According to the Administration (page updated on February 13, 2024), the contribution to the employment fund is added to income tax. It is 7 %, and 9 % for taxable income exceeding €150,000 for tax classes 1 and 1a, or €300,000 for class 2. This explains the rates of 42.80 % and 43.60 % cited on older pages of guichet.lu (2013 and 2023): 40 % plus 7 % gives 42.80 %, and 40 % plus 9 % gives 43.60 %. Applied to the 42 % tranche of the 2025 tariff, the increase of 9 % gives 45.78 % (42 × 1.09).

No wealth tax for individuals

According to guichet.lu (page updated on April 7, 2026), wealth tax only applies to opaque companies. It was abolished in 2006 for individuals, including partners in sole proprietorships or transparent companies. The page does not provide a tax rate or minimum tax amount.

The French impatriate regime

The tax authorities describe a system for employees relocating from abroad to Luxembourg (page updated on January 29, 2025). Since the 2021 tax year, Article 115 No. 13b of the Income Tax Law allows for the exemption, under certain conditions, of certain costs borne by the employer and certain benefits related to the employee's relocation. Three key points emerge from the page:

• the exemption applies for the entire duration of the employee's assignment in Luxembourg, without exceeding the end of the eighth tax year following the year of entry into service; ;
• The employer shall transmit to the competent RTS office, no later than January 31 of year N, the list of names of employees who are beneficiaries in year N-1; ;
• The page describes an exemption from certain costs borne by the employer.

The eligibility conditions are not detailed here: they can be found on the Administration's page.

Enter and register with the municipality

For stays of less than three months, France Diplomatie indicates free entry with a valid passport or national identity card. For stays longer than three months, arrival must be declared within 8 days, and a registration certificate must be obtained within 3 months from the municipality of residence, providing proof of sufficient resources, employment status, or enrollment in a training program. Part-time work of less than 10 hours per week is not sufficient to qualify for this certificate as an employee.

The guichet.lu portal describes the same procedure: declaration of arrival at the municipality within 8 days, registration within 3 months with the documents specific to the category (employee, self-employed worker, unemployed person, student, family member). For unemployed persons and students, proof of sufficient resources is required. For unemployed persons, proof of health insurance covering all risks in Luxembourg is also required, and for students, proof of health insurance coverage is required. The registration certificate is valid indefinitely. This page is undated: check the date before proceeding.

The Franco-Luxembourg convention

The tax treaty between France and Luxembourg on income and wealth taxes was signed in Paris on March 20, 2018. It entered into force on August 19, 2019, and is applicable from January 1, 2020. The French tax authority's official bulletin (BOFiP) also cites an amendment dated October 10, 2019, but does not specify its entry into force date. A second amendment, signed in Brussels on November 7, 2022, and published in the Official Journal on April 29, 2025, is listed by impots.gouv.fr as a text not yet in force. The substantive rules are not detailed here.

What this page does not cover

• The income tax scale for 2026.
• The taxation of dividends, capital gains and inheritances.
• Tax classes, beyond what has been said above.
• Eligibility conditions for the impatriate regime.

These points can be found in the official sources cited below.

Numerical example (fictitious profile)

Situation. A fictional executive moves to Luxembourg. A tax class 1 taxpayer, he has a taxable income of €300,000 in a given year.

Issue. He wants an order of magnitude of the tax on the portion of his income that exceeds the upper limit of the tax bracket.

Strategy. It applies the rate of the last bracket of the 2025 tariff to the portion of income located above €234,870.

Result. The portion exceeding €234,870 is €65,130 (€300,000 – €234,870). Taxed at 42% of income tax (%), this yields €27,354.60 in tax before the employment fund contribution. With the 9% surcharge (%) applicable to this income level in tax class 1, this same portion increases to €29,816.51 (€27,354.60 × 1.09). These figures only concern the highest tax bracket. The total tax liability assumes the application of the lower brackets, which are not detailed here, and takes into account the tax classes.

What changes depending on your situation

• Your tax residence and the length of your stay: these determine your resident or non-resident status.
• Your tax class: the rate shown is that of class 1.
• Your employment situation: the expatriate scheme is aimed at employees who move from abroad with certain costs being covered by their employer.
• Your residency status: employed worker or not, inactive or student, you do not provide the same supporting documents.
• Your links with France: residence on the French side is assessed separately.

These points are examined on a case-by-case basis. No result can be announced without this examination.