Luxembourg

Personal and business taxation in Luxembourg

Documentary position as at 26 September 2026. The reference points below relate to the 2026 tax year, unless stated otherwise, and are based on the coordinated text of the Income Tax Law in force on 1 January 2026, updated on 8 May 2026. Where an administrative page is older than the statutory text, the discrepancy is flagged rather than resolved.

1. Identifying the taxpayer, the tax and the year

1. Luxembourg has only one level of State for income tax, but the municipalities are involved in two significant taxes: the municipal business tax (*impôt commercial communal*), which is levied on the profits of commercial enterprises, and land tax (*impôt foncier*). An analysis must therefore distinguish personal income tax, corporate income tax (*impôt sur le revenu des collectivités*), municipal business tax and the net wealth tax on entities (*impôt sur la fortune des collectivités*) before reasoning in terms of an overall rate. S01S19S25

2. Direct taxes fall within the remit of the Direct Tax Administration (*Administration des contributions directes*, ACD); VAT, registration duties, inheritance duties and the subscription tax (*taxe d’abonnement*) fall within the remit of the Registration Duties, Estates and VAT Authority (*Administration de l’enregistrement, des domaines et de la TVA*, AED). This allocation determines the competent authority, the form and the appeal procedure; it also explains why real estate transfer duties and inheritance duties are not found in the Income Tax Law. S14S21S29S32

3. For corporate income tax, the tax year coincides with the calendar year (article 158 L.I.R.). The personal income tax scale applicable in 2026 is the one resulting from the Law of 20 December 2024, which has applied since the 2025 tax year: the coordinated text as at 1 January 2026 does not mention any subsequent amendment of article 118. The December 2025 laws did, however, add targeted measures applicable from the 2026 tax year. S01S11S12S13S15

4. The 2026 texts listed by the ACD as at 20 July 2026 mainly concern procedure, administrative cooperation (in particular crypto-assets), tax treaties, the Law of 3 February 2026 amending the L.I.R. (in particular article 99bis on carried interest) and implementing regulations, including those of 13 February 2026 on income-earning expenses (*frais d’obtention*), special expenses (*dépenses spéciales*) and withholding tax on salaries. This factsheet does not treat an announced but unpublished reform as settled; it covers only published texts. S14

2. Individual residence, arrival and departure

5. Under article 2 L.I.R., an individual is a resident taxpayer if he or she has his or her tax domicile or habitual abode in the Grand Duchy. A resident is taxable on domestic and foreign income; a non-resident is taxable only if he or she has domestic income within the meaning of article 156, and only on that income. S01

6. The concepts of domicile and habitual abode are defined by the Tax Adaptation Law of 16 October 1934. Domicile presupposes having a dwelling at one’s disposal in circumstances suggesting that it will be kept and used. Habitual abode presupposes a presence that is not merely temporary; unlimited tax liability arises in any event where the stay exceeds six months, and it then extends to the first six months. This factsheet cites the version published in 1934, without any official consolidation having been consulted. S04

7. The six-month threshold is therefore only one of the criteria: a person who keeps a dwelling in Luxembourg under the conditions of domicile may be resident without staying there for six months, and the converse applies to a prolonged stay without a dwelling. For a taxpayer who is also regarded as resident by France, the 2018 treaty resolves the conflict by reference to the permanent home, then the centre of vital interests, the habitual abode and nationality. S04S36

8. Resident spouses who are not separated in fact are taxed jointly, including where they marry or become resident during the year. On joint application, a couple of whom only one spouse is resident may be taxed jointly if the resident spouse earns in Luxembourg at least 90% of the household’s professional income. Partners may request joint taxation if the partnership and a common domicile have existed throughout the year. S01

9. On arrival, article 102, paragraph 4a, takes into account, for substantial shareholdings and for the purpose of calculating a future capital gain, the estimated realisation value on the date on which the non-resident becomes resident, rather than the historical acquisition price. This derogation is excluded where the taxpayer had previously been resident for more than fifteen years and then non-resident for less than five years before that date. S01

10. The coordinated law contains no general taxation of individuals’ unrealised capital gains on departure. However, article 156, no. 8, maintains Luxembourg taxation of a non-resident on gains from substantial shareholdings in a Luxembourg company where he or she was resident for more than fifteen years and became non-resident less than five years before the realisation, or where the disposal takes place within six months of the acquisition. These rules do not cover disposals of holdings in a corporate-form undertaking for collective investment, a SICAR or an SPF. A treaty may then remove this taxing right. S01S36

3. Personal income tax

11. Taxable income is determined by category: commercial profit, agricultural and forestry profit, independent professions, salaried employment, pensions and annuities, income from movable capital, rental of property and miscellaneous income, which includes speculative gains and certain capital gains. The tax is calculated on the adjusted taxable income according to the scale in article 118 and the taxpayer’s tax class. S01

12. The article 118 scale comprises a 0% band up to 13,230 euros, then bands from 8% to 38% between 13,230 and 54,090 euros, and four higher bands shown in the table below. This is the basic scale, before the employment fund surcharge. S01

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13. Taxpayers are divided into three classes. Class 2 covers in particular persons taxed jointly, widowed persons in the three years following the death and, subject to conditions, persons divorced or separated in the preceding three years. Class 1a covers, outside class 2, widowed persons, recipients of a tax reduction for children and persons who had completed their 64th year at the beginning of the tax year. Class 1 comprises all other taxpayers. S01

14. In class 1, the scale applies directly. In class 2, the tax is equal to twice the tax corresponding to half of the adjusted taxable income, on a quotient basis. In class 1a, the scale applies to the income reduced by one quarter of the difference between that income and 79,380 euros, with incremental rates capped at 39%, 40%, 41% and 42% according to the higher bands. S01

15. The tax thus obtained is increased to 107% as the contribution to the employment fund, and to 109% for the portion of adjusted taxable income exceeding 150,000 euros in classes 1 and 1a or 300,000 euros in class 2. The maximum marginal rate resulting from the 42% scale is therefore 45.78% (42% × 1.09). This surcharge also applies to the tax calculated for non-residents under articles 157 to 157ter. The ACD states these rates of 7% and 9% as applying since the 2013 tax year. S01S05S39

16. Extraordinary income is subject to its own calculation rules. For profits from the disposal or cessation of a business and net income under articles 99ter, 100 and 101 (long-term real estate capital gains and disposals of substantial shareholdings), the tax is calculated at a rate equal to half of the overall rate corresponding to the adjusted taxable income; this treatment applies automatically to such income. Since the Law of 3 February 2026, carried interest referred to in article 99bis, paragraph 1a, no. 1, may, on application, be taxed at one quarter of the overall rate. S01S14

17. Dividends paid by a fully taxable resident capital company, by a company resident in a treaty State subject to a tax corresponding to corporate income tax, or by a company covered by the Parent-Subsidiary Directive are 50% exempt in the hands of the recipient, subject to restrictions in the case of an exchange of shares. The 15% withholding tax deducted by a Luxembourg company is, in principle, credited against the tax due under assessment. S01S17

18. A Law of 19 December 2025 exempts, from the 2026 tax year, interest on certain euro-denominated government bonds issued between 15 January and 15 February 2026, with a three-year maturity and rated at the highest level by at least two agencies, both from income tax and from the final withholding tax under the Law of 23 December 2005. This is a one-off measure and does not cover savings in general. S01S11

19. The December 2025 laws also introduced a tax credit for investment in a start-up entity, available to resident individuals and to non-residents taxed under article 157ter for the year of the investment, subject to conditions relating in particular to the company’s age (less than five years), its innovative activity, its nature and a minimum holding period of three years, and raised to 4,500 euros the ceiling for deducting old-age pension savings contributions under articles 111bis and 111ter from the 2026 tax year. S12S13S01

20. Gains on assets other than real property fall within article 99bis only if they are realised within six months of the acquisition; substantial shareholdings, namely more than 10% held directly or indirectly, alone or with the spouse or partner and minor children, at any time during the preceding five years, fall within article 100 after that period. A disposal of non-substantial portfolio securities held for more than six months therefore falls within neither of these two categories. S01

21. For disposals falling within articles 99ter to 101, total income is reduced by an allowance of 50,000 euros, increased to 100,000 euros for spouses taxed jointly; the allowance is restored over ten years, since it is reduced by the allowances granted during the preceding ten years. The acquisition price is revalued using statutory coefficients, except for assets acquired since 2024, for which the coefficient is 1. S01

4. Inbound expatriates, profit-sharing bonus and rental allowance

22. The inbound expatriate (*impatrié*) regime is set out in article 115, no. 13b, in the version applicable since the 2025 tax year. It exempts 50% of the gross amount of the total annual remuneration paid to the inbound expatriate, excluding benefits in kind and certain cash benefits that are already exempt; the remuneration to which the exemption applies is capped at 400,000 euros. The maximum benefit therefore covers 200,000 euros of exempt remuneration. S01S09

23. An inbound expatriate is either an employee habitually employed abroad who is seconded by an enterprise of an international group to a Luxembourg enterprise of the same group, or an employee recruited directly from abroad by an enterprise that is either Luxembourg-based or established in the European Economic Area. Temporary agency workers and workers made available under a labour-lending arrangement are excluded. S01

24. The cumulative conditions include: tax domicile or habitual abode in Luxembourg; during the five tax years preceding the start of employment, no tax domicile in Luxembourg, no residence less than 150 km from the border and no taxation in Luxembourg on professional income; performance of the activity for at least 75% of working time; fixed gross annual remuneration of at least 75,000 euros; and no replacement of an employee who is not an inbound expatriate. S01

25. There are, in addition, conditions specific to secondment (five years’ seniority within the group or five years’ specialised experience, continuation of the employment relationship with the sending enterprise, a right of return and a secondment contract) or to recruitment (in-depth specialisation), as well as a ceiling of 30% inbound expatriates in the enterprise’s workforce, which does not apply to enterprises that have existed for less than ten years. S01

26. The exemption runs for the duration of the assignment, at most until the end of the eighth tax year following the start of employment, and ceases as soon as a condition is no longer met. The employer must send the ACD, by 31 January at the latest, the list of beneficiaries by name. Employees covered by the version applicable until 2024 remain subject to it, unless they make an express and irrevocable election for the new regime. S01

27. The profit-sharing bonus (*prime participative*) under article 115, no. 13a, is 50% exempt where it is determined by reference to the employer’s positive result and paid to an employee affiliated to Luxembourg social security or to a foreign scheme covered by a coordination instrument. The exemption is limited to 30% of gross annual remuneration; the total amount distributed may not exceed 7.5% of the positive result of the previous financial year. S01

28. The employer must earn commercial, agricultural or professional income, keep proper accounts in the year of grant and the preceding year, and send a list of recipients by name to the competent RTS office before 1 March of the following year. A variant allows the 7.5% threshold to be assessed at the level of a tax-consolidated group, on joint application by its members. S01

29. The rental allowance (*prime locative*) under article 115, no. 13c, is 25% exempt up to a monthly allowance of 1,000 euros, where the employee is under 30 years of age at the beginning of the year, the allowance does not exceed the rent excluding charges and gross annual remuneration does not exceed a ceiling expressed as a multiple of the minimum social wage. It is not an inbound expatriate regime and may apply to a local employee. S01

5. Non-residents, assimilation and withholding taxes

30. A married non-resident who earns professional income taxable in Luxembourg is, in principle, placed in class 1. Other non-residents are placed in class 1 or 1a, or in class 2 in the cases of recent widowhood or separation referred to in article 119. The text makes the tax reductions for children available to non-residents where the conditions are met. S01

31. Article 157ter allows assimilation to a resident for the purposes of the tax rate where the non-resident is taxable in Luxembourg on at least 90% of his or her worldwide income, or where his or her net income not taxable in Luxembourg is less than 13,000 euros. Salaries taxable in another State under a treaty are treated as Luxembourg income for the purposes of the 90% threshold, up to a limit of 50 working days. S01

32. Assimilation is requested or results from a rate being entered on the withholding tax card; it entails taxation by assessment and requires foreign income to be substantiated by supporting documents. Non-resident spouses are then taxed jointly on their Luxembourg income, their foreign income being used to determine the rate, unless they jointly request individual taxation. S01

33. A non-resident who does not earn professional income within the meaning of article 157bis, for example if he or she receives only Luxembourg-source rents or real estate capital gains, is placed in class 1 for his or her income not subject to withholding, and the rate may not be lower than 15%; the extraordinary income referred to in article 132, paragraphs 1 and 2, is also subject to a minimum rate of 15%, and that referred to in paragraph 3 (in particular carried interest) to a minimum rate of 7.5%. The tax so determined may not, however, exceed the class 1 tax on the same income increased by the exempt band of 13,230 euros (article 157, paragraphs 5 and 5a). For a non-resident falling within article 157bis, domestic income other than that referred to in nos. 4 and 5 of article 156 is also subject to a minimum rate of 15%, subject to the corrective mechanism in paragraph 6a. S01

34. Withholding tax on investment income is 15% on dividends and similar income, or 17.65% if the payer bears the tax. Ordinary interest paid to non-residents is not subject to withholding under domestic law; only certain interest carrying a profit participation falls within the scope of article 146. Royalties paid to non-residents are not subject to withholding. S01S17

35. Directors’ fees (*tantièmes*) are subject to withholding of 20% of the gross amount (25% of the net amount paid where the payer bears the tax), or taxed by assessment subject to conditions; taxation by assessment becomes mandatory in particular where income includes more than 1,500 euros of net directors’ fees. For a non-resident whose domestic income consists exclusively of directors’ fees not exceeding 100,000 euros gross per year, the withholding tax is, however, final, unless taxation by assessment is requested (article 152, paragraph 19). Income from artistic and sporting activities of non-residents is subject to withholding of 10% of receipts, or 11.11% if the payer bears the tax. S01S17

36. A non-resident’s gains on Luxembourg real property fall within article 156, no. 8: they are taxable in Luxembourg, whether they constitute a speculative gain or a long-term capital gain. The treaty with France confirms the taxing right of the State in which the property is situated, and extends it to shares in companies whose assets consist principally of real property. S01S36

6. Companies: residence, IRC, ICC and shareholdings

37. Capital companies (SA, SAS, SCA, SARL, SARL-S, SE) and other entities having their registered office or central administration in Luxembourg are resident for corporate income tax purposes. They are taxable on their worldwide income; non-resident companies are taxable only on their domestic income. The administration states that the income of a permanent establishment located in a treaty State is, in principle, exempt. S01S18

38. Since the 2025 tax year, article 174 sets corporate income tax at 14% for taxable income not exceeding 175,000 euros, at 24,500 euros plus 30% of the excess for income between 175,000 and 200,001 euros, and at 16% above 200,000 euros. The Guichet.lu page consulted still shows the rates of 15% and 17% applicable from 2019; the statutory text prevails. S01S09S18

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39. The employment fund contribution is a surcharge on IRC. The ACD and Guichet.lu indicate a 7% surcharge, applied since the 2013 tax year according to the ACD; however, the version of article 7 of the 1976 Law consolidated as at 1 January 2024, as published on Legilux, increases IRC “to 104 per cent”, i.e. a 4% surcharge. This factsheet uses 7%, the rate published by the administration, and flags that the Legilux consolidation consulted appears not to reflect the version in force, the current legal basis of which has not been read. S39S05S18

40. Municipal business tax is levied on commercial enterprises, including capital companies and Luxembourg permanent establishments of foreign enterprises, but not on the independent professions. It is calculated by applying a rate of 3% to the tax base and then the municipality’s multiplier, generally between 200% and 400% according to the administration. S19

41. The participation exemption under article 166 covers dividends received by a fully taxable resident entity (or a qualifying permanent establishment) from a subsidiary covered by the Parent-Subsidiary Directive, from a fully taxable resident capital company or from a non-resident company subject to a tax corresponding to IRC. The shareholding must be held directly (subject to the transparent entities referred to in paragraph 3); the recipient must hold, for at least twelve months or undertake to hold, at least 10% of the capital or a shareholding with an acquisition price of at least 1,200,000 euros. S01

42. Expenses directly economically related to an exempt dividend and the write-down resulting from its distribution are not deductible to the corresponding extent. The exemption is denied for intra-EU dividends that are deductible at the level of the subsidiary or paid under a non-genuine arrangement. Liquidation proceeds are treated as income from a shareholding. S01

43. The Grand-Ducal Regulation of 21 December 2001 extends the exemption to capital gains on the disposal of shareholdings where the transferor holds, for at least twelve months or undertakes to hold, at least 10% or a shareholding with an acquisition price of at least 6,000,000 euros. The gain remains taxable to the extent of the expenses and write-downs relating to the shareholding that previously reduced the taxable base. The available consolidated version dates from 1 January 2007. S08

44. “SOPARFI” is not a legal category: it is the usual name for an ordinary, fully taxable capital company that holds shareholdings and uses these exemptions. It remains subject to IRC, ICC and net wealth tax on its other items, and must comply with the substance, anti-abuse and transfer pricing rules, which are not detailed here. S01S20

45. Distributions by a Luxembourg company are, in principle, subject to the 15% withholding tax. Article 147 excludes withholding where the recipient is, in particular, a company covered by the Parent-Subsidiary Directive, a fully taxable resident capital company, a fully taxable company resident in a treaty State, a taxable Swiss company or an EEA company, holding or undertaking to hold at least 10% or 1,200,000 euros for twelve months. S01

7. VAT and invoicing

46. According to the AED, four rates apply: 17% for the standard rate, 14% for the intermediate rate, 8% for the reduced rate and 3% for the super-reduced rate, each of the special rates covering the goods and services listed in the annexes to the Law of 12 February 1979, with the 8% rate also covering certain transactions under article 40, paragraph 1, point 1°, (b) to (e). The AED states that the 17% standard rate has applied since 1 January 2024. S26S28

47. The scope of VAT comprises supplies of goods and services made for consideration within the country by a taxable person acting as such, intra-Community acquisitions and imports. A taxable person must register with the AED, issue invoices in the cases provided for, keep them for ten years, and file periodic and annual returns and recapitulative statements electronically. S21

48. Since 1 January 2025, the national threshold for the small business exemption has been 50,000 euros of turnover, with a 10% tolerance for exceeding it in the current year. A Luxembourg small business may benefit from the exemption in other Member States by registering for the cross-border scheme with the AED, provided that it complies with the national threshold of the State concerned and that its total turnover in the Union does not exceed 100,000 euros. S27

49. The construction and renovation of a dwelling used as a main residence may benefit from the 3% super-reduced rate, directly for construction and renovation carried out for oneself, and indirectly for certain renovations carried out for a third party. In the case of mixed use, the relief is granted in full if the main-residence floor area exceeds three quarters, and otherwise proportionately. The ceilings and procedures are not detailed here. S28

8. Real estate: acquisition, holding and disposal

50. According to the administration, the sale of real property bears 7%, namely 6% registration duty (a 5% rate increased by two tenths) and 1% transcription duty. A purchase for resale is subject to an effective registration duty rate of 7.2%. In the City of Luxembourg, a municipal surcharge equal to 50% of the registration duties applies to transfers inter vivos, subject to the exemptions provided for by the municipal regulations. S24S29S31

51. The “Bëllegen Akt” tax credit reduces the registration and transcription duties payable by an individual who acquires a dwelling to live in personally; it amounts to 40,000 euros per purchaser and requires, in particular, actual and personal occupation, which Guichet.lu presents as having to last at least two years. A minimum of 100 euros in duties remains payable. S24S34

52. According to the AED, a contribution of real property to a company in return for shares only (*apport pur et simple*) bears 2% increased by two tenths in registration duty and 1% transcription duty; a contribution for consideration bears 5% increased by two tenths and 1% transcription duty. Company deeds also give rise to a specific fixed duty of 75 euros under the conditions of the Law of 19 December 2008. S30

53. The disposal of private real property within five years of its acquisition gives rise to a speculative gain taxable at the scale rates; after that period, the capital gain falls within article 99ter, with revaluation of the price, the ten-year allowance and taxation at half the overall rate. This period was two years in the 2024 coordinated text; a two-year period was maintained on a transitional basis for disposals in the first half of 2025 and, provided that a preliminary sale agreement was registered by 30 June 2025 at the latest, for disposals in the third quarter of 2025. S01S02S03

54. The main residence is excluded from articles 99bis and 99ter where it has been the habitual residence since the acquisition or for at least the five years preceding the disposal, unless family or professional reasons dispense with that period. For real property received in the direct line that served as the parents’ main residence, an additional allowance of 75,000 euros per heir is deducted before the ten-year allowance. Land tax is an in rem tax levied for the benefit of the municipalities; the municipal regulations and rates for 2026 were referred to in Mémorial A No. 11 of 20 January 2026. S01S25S14

9. Wealth: no net wealth tax on individuals

55. Net wealth tax was abolished for individuals in 2006, including where they are partners in a sole proprietorship or a tax-transparent company. It remains in place for opaque entities: resident companies are taxed on their worldwide net wealth, subject to treaties, and non-resident companies on their Luxembourg net wealth. Net wealth is valued as at 1 January. S20S06

56. The standard rate is 0.5% up to 500,000,000 euros of taxable net wealth and 0.05% above that amount. Since the reference date of 1 January 2025, the minimum net wealth tax of resident entities depends solely on the balance sheet total: 535 euros up to 350,000 euros, 1,605 euros up to 2,000,000 euros, and 4,815 euros above that amount. This scale amount is reduced by the IRC, increased by the employment fund contribution, due for the preceding tax year after deduction of any tax credits; the minimum tax so reduced, which may fall to zero, applies only if it exceeds the standard tax. S06S10

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57. Securitisation companies, SICARs, certain reserved alternative investment funds and the pension savings vehicles designated by the circular are exempt from the standard tax but subject to the minimum tax; non-resident entities are not subject to it. Guichet.lu presents these entities, in a more summary manner, as not concerned: the more precise 2026 circular should be preferred. S06S20

58. Qualifying shareholdings (at least 10% or a cost of at least 1.2 million euros in an eligible subsidiary) are, according to the administration, excluded from taxable net wealth. A reduction in net wealth tax is available in return for allocating to a reserve an amount equal to five times the reduction, maintained for five years, up to the limit, according to Guichet.lu, of IRC increased by the employment fund contribution; an early distribution of the reserve leads to the reinstatement of one fifth of the reserve used. According to the 2026 circular, this reserve-based reduction (§ 8a) applies only to the standard tax; the minimum tax is reduced only by the IRC for the previous year (§ 8, paragraph 2). S20S06

10. Inheritances and gifts

59. Inheritance duty is levied on everything received from the estate of an “inhabitant” (*habitant*) of the Grand Duchy, that is to say a person who established his or her domicile or the seat of his or her fortune there. Where the deceased was not an inhabitant, only a transfer duty on death is levied on real property located in Luxembourg; according to the administration, the deceased’s other movable assets in Luxembourg are not subject to Luxembourg inheritance tax. S35S22

60. For an inhabitant, the estate comprises movable property located in Luxembourg and abroad and Luxembourg real property; foreign real property is excluded and foreign movable property may be excluded subject to conditions. Exemption applies to what is received in the direct line, up to the statutory share, to what is received between spouses or between partners bound by a partnership declaration registered more than three years before the opening of the succession, without that limit, and to estates whose net assets do not exceed 1,250 euros. S22S33

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61. The basic rates are increased where the net share received by a beneficiary exceeds 10,000 euros, by one tenth between 10,000 and 20,000 euros, up to twenty-two tenths above 1,750,000 euros. Transfer duties on death follow the same rates and increases, the direct-line exemption remaining limited to the statutory share. Duties are in principle payable within six weeks of the AED’s request for payment. S32S22

62. Gifts made before a Luxembourg notary bear proportional registration duties: 1.8% in the direct line without exemption from collation (*dispense de rapport*), 2.4% with such exemption, 4.8% between spouses, 4.8% between partners bound by a partnership declaration registered for more than three years, 6% between brothers and sisters, 8.4% between uncles or aunts and nephews or nieces, 9.6% in the next degree and 14.4% between unrelated persons. Manual gifts (*dons manuels*) are not necessarily registered. S23S29

63. Gifts made in the year preceding death and not subject to registration duties, in particular manual gifts, may be added back to the estate, as may certain transfers to close relatives in the three months preceding death with a reservation of usufruct. Planning a transfer by way of manual gifts must therefore take this period into account. S22

11. Treaties, France and international obligations

64. The France–Luxembourg treaty of 20 March 2018, applicable from 1 January 2020, was amended by a 2019 amending protocol on the elimination of double taxation and by an amending protocol of 7 November 2022, applicable from 1 January 2023, increasing from 29 to 34 days the tolerance for work outside the State of employment. It covers income tax, corporate income tax, net wealth tax and municipal business tax, but not inheritance duties. S36S16S38S37

65. Luxembourg-source dividends paid to a resident of France are taxable in Luxembourg at no more than 15%; they are taxable only in France where the beneficial owner is a company holding directly at least 5% of the capital for 365 days including the payment. Interest is taxable only in the recipient’s State of residence; royalties are also taxable at source, up to a limit of 5%. S36

66. Gains from the disposal of shares deriving more than 50% of their value from real property situated in the other State, at any time during the preceding 365 days, are taxable in that State, excluding real property used in the company’s own business. An individual who was resident in the other State within the five years preceding the disposal may be taxed there on a substantial shareholding, that is to say one entitling him or her, alone or with related or connected persons, to 25% or more of the profits of a company of that State. This point is essential for a French person settled in Luxembourg who disposes of French shares. S36

67. For employees, a resident of one State working in the other remains taxable in the State of employment if he or she does not work more than 34 days per year in his or her State of residence or a third State. Any fraction of a day counts as a full day; holidays, rest days, sickness and force majeure are excluded; the threshold is prorated for part-time work. If it is exceeded, the State of residence taxes, from the first day, the days worked outside the State of employment. S36S37S07

68. France eliminates double taxation by means of a tax credit, equal to the French tax for most income actually taxed in Luxembourg, or limited to the Luxembourg tax for, in particular, business profits subject to corporate income tax, dividends, royalties, certain gains, directors’ fees and income of artistes and sportspersons. Luxembourg exempts income taxable in France, subject to progression, except for dividends, royalties and income of artistes, sportspersons and models (articles 10, 12 and 16), for which it credits the French tax. The protocol reserves, in particular, the application of articles 115 quinquies, 123 bis, 155 A, 209 B, 212, 238 A and 238-0 A of the French General Tax Code (*code général des impôts*). S36

69. Luxembourg is bound to the United Arab Emirates by a treaty signed on 20 November 2005, applicable from 1 January 2010, amended by a 2014 protocol applicable since 2016. A detailed reading of it falls outside this factsheet, but its existence must be taken into account for any UAE–Luxembourg–France holding chain. S16

12. Illustrative cases and limits of application

70. Case of a single resident in class 1 with adjusted taxable income of 100,000 euros. The article 118 scale gives basic tax of approximately 26,765 euros; the 7% employment fund surcharge raises it to approximately 28,638 euros, i.e. an average rate of around 28.6%. The calculation takes no account of tax credits, social security contributions or tax already withheld. S01S05

71. Case of a married couple in class 2 with adjusted taxable income of 200,000 euros. The basic tax is twice the tax corresponding to 100,000 euros, i.e. approximately 53,529 euros, raised to approximately 57,276 euros by the 7% surcharge, since the 300,000-euro threshold for the 9% surcharge is not reached. The same income in class 1 would have been taxed significantly more heavily, hence the importance of the residence tie-breaker and of joint taxation. S01S05

72. Case of an executive recruited in Paris by a Luxembourg company, with fixed remuneration of 180,000 euros. If he or she settles in Luxembourg and meets all the conditions of article 115, no. 13b, including not having lived less than 150 km from the border during the preceding five years (a condition not met by a former resident of Metz or Thionville), 90,000 euros are exempt. If, on the contrary, he or she settles in Thionville, the regime is not available owing to the absence of Luxembourg residence; if he or she then works 40 days per year in France, the 34-day threshold is exceeded and France taxes those days. S01S36S07

73. Case of a Luxembourg holding company owned by a UAE resident and receiving dividends from a 100%-owned French subsidiary. The Luxembourg exemption of the dividends requires a qualifying shareholding in an eligible subsidiary, for example a company covered by the Parent-Subsidiary Directive; the absence of French withholding tax depends on article 10 of the France–Luxembourg treaty and on French domestic law, and the onward distribution to the UAE is then governed by article 147 L.I.R. and the Luxembourg–UAE treaty. Each tier must be checked separately. S01S36S16

74. These reference points do not replace an individual calculation. This factsheet does not detail social security contributions, tax consolidation, the limitation on interest deductibility, the anti-hybrid rules and the global minimum tax, the regimes for funds, the SPF and intellectual property, or the details of the final withholding tax on interest. The older administrative pages cited must be reread each time the coordinated text is updated. S01S18S19S22

Sources

The official texts and pages were consulted on 26 September 2026. The ACD coordinated texts and the Legilux consolidations have documentary value only; the publications in the Official Journal are authoritative. Two 2026 circulars published as scanned PDFs were read by optical character recognition.

• S01: Amended Law of 4 December 1967 on income tax (L.I.R.), coordinated text in force on 1 January 2026
• S02: L.I.R., coordinated text in force on 1 January 2025
• S03: L.I.R., coordinated text in force on 1 January 2024
• S04: Tax Adaptation Law of 16 October 1934 (Steueranpassungsgesetz), original publication in the Mémorial
• S05: Amended Law of 30 June 1976 establishing an employment fund, consolidated version applicable on 1 January 2024
• S06: Circular of the Director of Direct Taxes I. Fort. No. 56 of 12 May 2026 (rates and minimum net wealth tax, § 8a VStG reduction)
• S07: Circular of the Director of Direct Taxes L.G. – Conv. D.I. No. 61 of 24 June 2026 (point 3 of the protocol to the France–Luxembourg treaty)
• S08: Grand-Ducal Regulation of 21 December 2001 implementing article 166, paragraph 9, no. 1 L.I.R., consolidated version as at 1 January 2007
• S09: Law of 20 December 2024 (Mémorial A 2024, No. 589) amending, in particular, the L.I.R.
• S10: Law of 20 December 2024 (Mémorial A 2024, No. 563) amending the Abgabenordnung, the Net Wealth Tax Law and the L.I.R.
• S11: Law of 19 December 2025 (Mémorial A 2025, No. 613) amending the L.I.R. and the Law of 23 December 2005 on the final withholding tax
• S12: Law of 19 December 2025 (Mémorial A 2025, No. 617) introducing the start-up tax credit
• S13: Law of 19 December 2025 (Mémorial A 2025, No. 623) amending, in particular, the L.I.R.
• S14: ACD, Legislation 2026 (laws, regulations and circulars of 2026)
• S15: ACD, Legislation 2025
• S16: ACD, international treaties in force and under negotiation
• S17: ACD, rates of withholding tax on dividends, interest, royalties, directors’ fees and artistic and sporting activities
• S18: Guichet.lu, corporate income tax
• S19: Guichet.lu, municipal business tax
• S20: Guichet.lu, net wealth tax (entities)
• S21: Guichet.lu, VAT
• S22: Guichet.lu, inheritance duties and transfer duties on death
• S23: Guichet.lu, making a gift
• S24: Guichet.lu, tax credit on notarial deeds (“Bëllegen Akt”)
• S25: Guichet.lu, land tax
• S26: AED, VAT: applicable national rates
• S27: AED, SME – small business exemption scheme
• S28: AED, VAT on housing: general points
• S29: AED, registration: rates
• S30: AED, contribution of real property to a company
• S31: AED, municipal surcharge on registration duties
• S32: AED, inheritance: rates
• S33: AED, inheritance: exemptions
• S34: AED, “Bëllegen Akt” tax credit
• S35: Law of 27 December 1817 on the collection of inheritance duty (text published by the AED)
• S36: France–Luxembourg tax treaty of 20 March 2018, consolidated version (2019 and 2022 amending protocols)
• S37: France–Luxembourg mutual agreement on the arrangements for applying the 34-day threshold
• S38: DGFiP, international treaties (Luxembourg section)
• S39: ACD, A to Z: employment fund