Luxembourg
Top Income Tax
42%
Marginal rate
Corporate Tax
24.94%
Standard rate
VAT / Sales Tax
17%
Standard rate
Capital Gains
21%
Standard rate
Overview
Luxembourg is a major financial center and EU institution hub with a sophisticated holding company regime and IP Box. The lowest standard VAT in the EU (17%) and a participation exemption make it attractive for corporate structuring. High quality of life but very high cost of living.
Income Tax Brackets
| Income Range (EUR) | Tax 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 - 100,000 | 39% |
| 100,000 - 150,000 | 40% |
| 150,000 - 200,000 | 41% |
| 200,000+ | 42% |
Many narrow brackets. Plus solidarity surcharge (7-9% of tax) and municipal tax (~6.75% in Luxembourg City).
Corporate Tax
Standard Rate
24.94%
17% corporate + 1.19% solidarity surcharge + 6.75% municipal = ~24.94% in Luxembourg City.
VAT / Sales Tax
Standard Rate
17%
Reduced Rates
3%, 8%, 14%
17% standard - lowest standard VAT in EU. 3% on food, books, children's clothes.
Capital Gains Tax
Standard Rate
21%
Long-Term Rate
21%
Half of gains exempt after 6 months holding. 50k EUR exemption on some movable property.
Social Security Contributions
Employee
12.45%
Employer
12.45%
Self-Employed
24.9%
Covers pension, health, long-term care, mutual insurance.
Special Tax Regimes
IP Regime
80% exemption on net income from qualifying IP rights, resulting in effective rate of ~5%.
Eligibility: Must own qualifying IP rights (patents, copyrighted software, trademarks). Nexus approach applies.
SOPARFI (Holding Company)
Participation exemption on dividends and capital gains from qualifying subsidiaries.
Eligibility: Must hold at least 10% or EUR 1.2M acquisition price. Various conditions apply.
Pros & Cons
Pros
- Lowest standard VAT in EU (17%)
- IP regime ~5% effective rate
- SOPARFI holding company benefits
- EU financial center
- Multilingual workforce
- High quality of life
Cons
- High personal income tax (42%+)
- No digital nomad visa
- Very high cost of living
- Small country
- Complex multi-bracket system
Living Indicators
Cost of Living Index
Expensive
Quality of Life Index
Excellent
Best For
Data Sources
Tax rate data for Luxembourg is compiled from the following authoritative sources:
- OECD Tax Database
- Tax Foundation International Tax Competitiveness Index
- World Bank Business Enabling Environment
- Luxembourg government tax authority publications
- PwC Worldwide Tax Summaries
Last verified: 2024-01
Disclaimer: This content is for informational purposes only and does not constitute tax advice. Tax laws change frequently. Always consult a qualified tax professional before making decisions about your tax residency or obligations.