Luxembourg Personal Income Tax

Residents of Luxembourg are subject to tax on their worldwide income. Nonresidents are subject to tax on their Luxembourg-source income only.

Individuals are considered resident if their accommodation indi­cates that they do not intend to reside only temporarily in Luxem­bourg or if they spend more than six months in Luxembourg.

Married individuals (effective from 1 January 2015, married same-gender couples are included) are jointly taxable. Registered partners (under Luxembourg or foreign law) may claim joint taxation through the filing of a joint income tax return. The eli­gible partners need to share a common domicile or residence and their partnership must exist during the entire relevant fiscal year.

Income subject to tax. Luxembourg income tax law distinguishes among several categories of income, including income from em – ployment, self-employ ment, trade and business, and agriculture.

Employment income. Resident and nonresident employees are sub ject to income tax on remuneration received from employ­ment. Employment income includes wages, salaries, bonuses, employer-provided pension contributions and all other compen­sation in cash or in kind. Wage tax is withheld at source.

Self-employment and business income. Individuals who act inde­pendently in their own name and at their own risk are taxed on income derived from self-employment or business activities. Nonresidents are taxable only to the extent they operate through either a permanent establishment or a fixed place of activity locat ed in Luxembourg.

In general, taxable income includes all income and capital gains attributable to self-employment or business activities, at the rates set forth in Rates.

Investment income. Dividends received by a resident taxpayer from a resident or nonresident company are generally subject to personal income tax. A 50% exemption is granted for dividends received from the following:

  • A fully taxable Luxembourg-resident company
  • A taxable European Union (EU) resident company that is cov­ered by the EU Parent-Subsidiary directive
  • A taxable company resident in a country that has entered into a double tax treaty with Luxembourg and that is subject to com­parable corporate taxation

A 15% tax is withheld by a Luxembourg distributing company and can be offset against Luxembourg tax or refunded under certain circumstances. Only 50% of the expenses related to such dividends is deductible.

Under the EU Savings Directive (2003/48/EC) and the Luxem­bourg law implementing the directive, Luxembourg paying agents were required to withhold tax on interest paid to beneficial owners (individuals or residual entities residing in other EU member states as well as in some non-EU countries), unless these individuals chose exchange of information or provided the paying agent with a certificate issued by the tax authorities of their home country. The withholding tax rate was 35%.

Effective from January 2015, automatic exchange of information with respect to interest paid is mandatory, and Luxembourg pay­ing agents no longer withhold tax on behalf of nonresident tax­payers living outside Luxembourg. Interest income is automati­cally reported to the beneficiary’s country of residence. Luxembourg has also implemented Foreign Account Tax Compliance Act legislation, as well as Common Reporting Standards rules, which furthers expand the scope of automatic exchange of information with participating countries.

A final withholding tax of 10% is imposed on interest income paid by a paying agent established in Luxembourg to beneficial owners resident in Luxembourg. Interest income subject to this final with­holding tax is no longer required to be reported into the annual tax return. The withholding tax is not considered a final withholding tax if the income derives from business assets (assets used in self-employment or business activities) of the investor rather than from private assets. The definition of interest payment subject to a final withholding tax is the same as the definition contained in Article 6 of the law implementing the EU Savings Directive with certain exclusions (for example, dividends or capital gains derived from investment funds). In addition, the law provides that for certain savings deposits, interest under a threshold of EUR250 per person per paying agent is not taxable.

Individuals resident in Luxembourg may opt for a final tax of 10% on eligible interest income received from paying agents located in the following jurisdictions:

  • EU member states
  • European Economic Area (EEA) states
  • Jurisdictions that have entered into an agreement with Luxem­bourg that includes measures equivalent to those of the EU Savings Directive (2003/48/EC) (that is, dependent and associ­ated territories and third countries)

The option for a final withholding tax of 10% applies to the same eligible interest income (deriving from private assets only) as defined by Luxembourg law (see above). The annual tax-free ceiling of EUR250 per individual and per paying agent also applies to eligible interest income paid outside Luxembourg. The option for a final withholding tax of 10% is requested through a specific form that must be filed before 31 March of the year fol­lowing the year of payment.

If the taxpayer is a Luxembourg resident, income excluded from the 10% final withholding tax must be reported in the annual tax return and is taxed at the progressive rates.

A lump-sum deduction of EUR25 is granted for expenses related to both dividend and interest income (excluded from the 10% final withholding tax), unless actual expenses are higher. This lump-sum deduction is EUR50 for spouses/partners sub­ject to joint taxation. In addition, both dividend and interest income (excluded from the 10% final withholding tax) are exempt up to EUR1,500 (the exemption is doubled for spouses/ partners jointly taxable). Expense deductions may not create a loss that could be offset against other sources of income, except in certain limited cases.

Royalties and income from the rental of real estate are aggregated with other income and taxed at the rates set forth in Rates.

Nonresidents are subject to the 15% withholding tax on dividends received from Luxembourg companies. However, if an applic able double tax treaty provides a lower tax rate, nonresidents can claim a refund of the excess tax withheld. Most of the double tax treaties entered into by Luxembourg provide for a maximum tax rate of 15% on gross dividends.

Nonresidents are not subject to withholding tax on royalties.

Directors’ fees. Payments to managing directors of Luxembourg companies for day-to-day management are considered to be em ployment income and are taxed at the rates set forth in Rates. Otherwise directors’ fees are subject to withholding tax at a rate of 20%. If a nonresident director’s only professional income in Luxembourg amounts to a gross fee of less than EUR100,000 per year, the 20% withholding tax is a final tax and an individual income tax return does not need to be filed. However, the non­resident director may file a tax return at his or her discretion. Individuals who are re quired to or elect to file an income tax return may credit the 20% withholding tax against their Luxembourg tax liability.

If the company bears the tax on directors’ fees, then the tax rate applicable to the net fees is 25%.

Special tax regime for expatriate highly skilled employees. A ben­eficial income tax regime has been introduced for expatriate highly skilled employees. This regime provides tax relief for certain costs linked to expatriation and is subject to several condi­tions. The tax regime, which entered into force on 1 January 2011 and was amended in May 2013 (effective from January 2013) and on 27 January 2014 (effective from 1 January 2014), applies to employees who are sent to work temporarily in Luxembourg on an assignment between intragroup entities. It also applies to employ­ees who are directly recruited abroad by a Luxembourg company to work in Luxembourg.

Under certain conditions, various costs directly related to the expatriation are not considered taxable employment income. Under the special tax regime, the following expatriate benefits and allowances are not taxable.

  • Moving costs (transportation of goods, transfer travel expenses, furnishing costs and similar expenses).
  • Costs related to housing in Luxembourg and expatriation (rent and utilities if the former accommodation is maintained in the home country or the housing differential if the former accom­modation is not maintained), one home-leave trip and tax-equalization costs. However, these costs are limited to EUR50,000 per year (EUR80,000 for married couples or part­ners sharing accommodation) or 30% of the fixed total annual remuneration, whichever is less.
  • School fees for children in primary and secondary education.
  • Cost-of-living allowance and miscellaneous expenses (not spe­cifically provided for) linked to the expatriation. However, these costs are limited to EUR1,500 per month or 8% of the fixed monthly remuneration (EUR3,000 and 16%, respectively, for married couples or partners sharing accommodation pro­vided that they are not performing a professional activity), whichever is less.

The tax regime applies for a maximum of five years. As a result of the 2013 and 2014 changes to benefit from the tax regime, it is no longer necessary to file a written motivated application, and Luxembourg payroll is no longer required. Instead, a list of em­ployees who benefited from the regime needs to be sent by 31 January of the following year.

Taxation of employer-provided stock options. If a stock option is freely tradable or transferable, the employee is taxed on the date the option is granted. If the option is not tradable or transferable, the employee is taxed on the date the option is exercised. The taxable benefit is subject to income tax and to social security contributions by both the employer and the employee (up to the ceiling).

Capital gains

Movable property. Substantial shareholdings (more than 10%) in resident or nonresident corporations are fully subject to tax on capital gains in the hands of resident taxpayers. However, half of the average tax rate (a maximum rate of either 21.4% or 21.8% and tax relief of EUR50,000 (EUR100,000) for spouses or part­ners jointly taxable) apply to capital gains if substantial share­holders sell the shares after a six-month holding period. For the disposal of substantial shareholdings, an adjustment for inflation applies to the acquisition price. In addition, Luxembourg intro­duced with retroactive effect on 1 January 2015 a step-up mecha­nism. Under this mechanism, the acquisition price for the purpose of determining the capital gain is the fair market value of the shares on the date of establishing Luxembourg tax residence, rather than the actual acquisition price. Capital gains on non-substantial shareholdings (10% or less) and other securities, such as shares in investment funds, are tax-free if they are realized more than six months after acquisition. Other wise, the gains are fully taxable at the rates set forth in Rates.

Capital gains derived from the disposal of substantial sharehold­ings in corporations are taxable in the hands of a nonresident taxpayer if either of the following applies:

  • The taxpayer was previously resident in Luxembourg for more than 15 years and became nonresident less than 5 years before the disposal.
  • The taxpayer sold his or her shares in Luxembourg companies within six months following the acquisition.

The above rules regarding nonresidents do not apply if an applicable tax treaty does not give Luxembourg the right to tax the gains.

Real estate. Capital gains on sales of privately owned buildings and land realized within two years after purchase are taxable as ordinary income. Gains on real estate sold more than two years after purchase are taxable after adjustment for inflation and appli cation of a standard exemption of EUR50,000. This allow­ance is EUR100,000 for spouses/partners subject to joint taxa­tion. The exemption is renewed every 10 years (for example, if the exemption is completely used up in one year, the individual must wait 10 years to claim another exemption). In addition, the capital gain is taxed at half of the normal rate (a maximum rate of either 21.4% or 21.8%). An additional allowance of EUR75,000 for each spouse/partner is available for the sale of a home inher­ited by a direct descendant that was the principal residence of the taxpayer’s parents or spouse.

For the sale of real estate taking place from 1 July 2016 to 31 December 2017, such capital gains are taxed at 1/4 of the over­all tax rate.

Gains derived from the sale of a principal residence are exempt from tax.

Nonresident taxpayers are taxed on capital gains derived from real estate located in Luxembourg in the same manner as residents.

Realized by a business. Capital gains derived from investments and from the disposal of real estate that forms part of the net asset value of a privately owned business are taxable.

Deductions

Deductible expenses. Non-reimbursed expenses incurred by an em ployee to create, protect or preserve employment income are generally deductible. A standard deduction of EUR540 for employ­ment-related expenses is granted. The standard deduction is doubled for a married couple if both spouses earn employment income.

The following expenses are deductible for tax purposes:

  • Alimony paid to a divorced spouse and other specified periodic payments
  • Social security contributions levied on salary (however, care insur­ance is not deductible; see Social security)

In addition, interest on loans contracted to purchase owner-occupied housing is deductible up to a ceiling that decreases with the length of time the housing is occupied, as indicated in the following table.

Year of occupation                                              Ceiling (EUR)*

From 2011                                                                             1,500

From 2006 to 2010                                                                1,125

2005 and previous years                                                       750

 

* This is the ceiling for each member of the household.

The Luxembourg government announced that in the context of the 2017 tax reform, the above ceilings will increase to EUR2,000, EUR1,500 and EUR1,000, respectively.

Subject to certain conditions, each of the following items is deductible, up to an annual ceiling of EUR672 for each person in the taxpayer’s household:

  • Premiums paid for voluntary life, accident, sickness, unem­ployment and third-party automobile insurance
  • Contributions to house-saving institutions to finance housing through approved home-ownership plans

Interest on consumer loans can also be deducted. However, the ceiling for the deduction has been reduced from EUR672 to EUR336 for each person in the taxpayer’s household.

Under specified conditions, old-age providence premiums may be deducted up to an annual ceiling ranging from EUR1,500 to EUR3,200, depending on the age of the subscriber. The Luxembourg government announced that in the context of the 2017 tax reform, it intends to encourage taxpayers to subscribe to such type of plan by granting a maximum deduction of EUR3,200, regardless of the age of the subscriber.

Personal deductions and allowances. A deduction may be claimed for the following extraordinary expenses if specified conditions are fulfilled:

  • Expenses for hospitalization that are not covered by a sickness fund
  • Maintenance of close relatives
  • Expenses related to handicapped persons
  • Child care expenses
  • Employment of domestic staff

Business deductions. In general, all expenses for business or professional activities are deductible, such as the following:

  • Costs of material and stock
  • Staff costs, certain taxes, rental and leasing expenses, finance charges, self-employed social security contributions, and all gen­eral and administrative expenses
  • Depreciation of fixed assets
  • Provisions for identified losses and expenses
  • Loss carryforwards

Rates. Tax rates are progressive with a maximum rate of either 42.8% or 43.6% for 2016 (7% or 9% unemployment fund contri­bution included). The marginal tax rate is 43.6% for income exceeding EUR150,000 for taxpayers in Tax Class 1 (single individuals) and Tax Class 1a (single, separated or divorced indi­viduals with children) and EUR300,000 for taxpayers in Tax Class 2 (married couples or partners jointly taxable). This mar­ginal rate may be increased to 45.78% according to the announce­ment made by the Luxembourg government on the 2017 tax reform.

A new tax in Luxembourg took effect on 1 January 2015. This temporary budget balancing tax is 0.5% of total income (profes­sional income, replacement income [income received that replac­es the remuneration that you would have received if you were working, such as unemployment allowances and disability allow­ances] and investment income), reduced by the minimum social salary, which currently equals EUR23,075.52 per year (if the Luxembourg social security system applies). (The deduction of the minimum social salary does not apply if the individual is not subject to Luxembourg social security contributions.) The amount deductible is different for “independent and assimilated taxpayers” (EUR17,306.64 per year reduced by 3/4 of the mini­mum salary). For this purpose, “independent and assimilated taxpayers” includes self-employed persons and certain other individuals.

The Luxembourg government announced that in the context of the 2017 tax reform, this temporary budget balancing tax will be abolished, effective from 1 January 2017.

Effective from 1 January 2008, the tax classes for dependent children were abolished. This tax relief was replaced by a monthly tax bonus of EUR76.88 per child, which is paid by the Luxembourg Family Allowance Authority (Caisse Nationale des Prestations Familiales, or CNPF) for children qualifying for Luxembourg family allowances. However, the tax bonus is already included in the state financial aid granted to resident students in higher edu­cation. If the bonus is not paid by the CNPF or not included in the state financial aid, the tax relief needs to be requested through the filing of a tax return or refund application (décompte annuel).

Effective from 1 August 2016, the family allowance equals EUR265 per month (in which the monthly tax bonus is included) per child for children not already benefiting from the family allowance (that is, children for whom the allowance is requested after the implementation of the reform or born on or after 1 August 2016).

The table below sets forth the average income tax rates for 2016, taking into account the 7% unemployment fund contribution and the tax credit of EUR300 for professional income, but not the new temporary budget balancing tax of 0.5%. The contribution to the unemployment fund is 9% on income exceeding EUR150,000 for taxpayers in Tax Classes 1 and 1a and EUR300,000 for tax­payers in Tax Class 2. The following is the table of average income tax rates for 2016.

Single individual Married Couple
Taxable income (EUR) Amount of tax (EUR) Effective tax rate (%) Amount of tax (EUR) Effective tax rate (%)
20000 788 3.94 0 0
40000 6484 16.21 1876 4.69
60000 14808 24.68 6450 10.75
80000 23160 28.95 13264 16.58
100000 31500 31.5 21580 21.58
120000 40068 33.39 29916 24.93
140000 48622 34.73 38262 27.33

In the context of the announced tax reform that should enter into force in 2017, the above-mentioned average tax rates will evolve.

In general, nonresidents are subject to the above rates. For non­residents, a minimum tax applies to all income other than employment or pension income.

Business profits tax. Net business profit is subject to income tax and municipal business tax.

Certain tax credits, such as the investment tax credit, may reduce the final tax due.

In addition, privately held businesses are subject to municipal busi­ness tax on trade profit as computed for income tax purposes, sub­ject to various adjustments, less a standard exemption of EUR40,000. The rate varies depending on the municipality, but generally is approximately 7.5% (6.75% for Luxembourg City).

Nonresidents who carry on business through a permanent estab­lishment in Luxembourg are taxed at the same rates as residents.

Relief for losses. Business losses may be carried forward without limitation if accounts are kept in accordance with generally accepted accounting principles. Losses may not be carried back. They may not be deducted by a successor except under certain circumstances.

Losses derived from investments in securities may only offset positive investment income, and not positive income from other categories. However, an exception to this rule may apply if the taxpayer holds a significant shareholding in a company and derives his or her main professional earnings from activities in that company.

Other taxes

Net worth tax. The wealth tax for resident and nonresident indi­viduals was abolished, effective from 1 January 2006.

Inheritance and gift taxes. The tax base for inheritance tax is the market value at the time of death of the entire net estate inherited from a person domiciled in Luxembourg. Exemptions apply to real estate located abroad and, under certain conditions, to movable assets held outside Luxembourg. If the decedent was a nonresi­dent at the time of his or her death, death tax is levied only on real estate located in Luxembourg. The inheritance tax rates range from 0% to 48%. The rate applicable to heirs in direct line (for example, a son or daughter, or grandson or granddaughter) is 0%. A 0% rate also applies to any inheritance between spouses or registered partners of more than three years with at least one common child. Death taxes are imposed on real estate located in Luxembourg that is left by a person who was not an inhabitant of Luxembourg, even a person in direct line, at rates that range from 2% to 48%.

Gifts and donations that are required to be registered with the Administration de l’Enregistrement (and therefore subject to registration tax) are subject to gift tax. Gift tax is payable by the resident or nonresident donee on the gross market value of the assets received. The rates range from 1.8% to 14.4%, depending on the relationship between the donor and the donee.

Gifts that are not required to be made in writing (for example, gifts of movable assets transferred by delivery [dons manuels]) are generally accepted without registration. However, such gifts may be subject to registration tax if another registered deed refers to them.

In addition, gifts made by the decedent within the year preceding his or her death are aggregated with the taxable asset base, unless they were subject to gift duties.

Social security

Contributions. Social security contributions apply to wages and salaries and must be withheld by the employer. These contribu­tions cover old-age pension and health insurance. Only employers pay contributions for professional accident coverage. The follow­ing social security contribution rates for employers and employees apply as of 1 January 2016.

.                                             Employee                          Employer

.                                                      %                                        %

Pension (a)                                   8                                      8

Illness (a)                                   3.05                                 3.05

Accident (a)                              N.A.                                  1.00 (b)

Health at Work (a)                    N.A.                                  0.11 (c)

Mutual insurance (a)                 N.A.                      0.46 to 2.93 (d)

a) The contribution rates are subject to an annual ceiling of EUR115,377.84, effective from 1 January 2016.

b) The rate is the same regardless of the employer’s sector of activity.

c) The Health at Work contribution is payable only by employers that are mem­bers of the National Service for Health at Work.

d) The rate varies according to the risk class of the employer based on the rate of absenteeism of the employees.

In addition, dependence insurance to support the elderly and the disabled is payable by employees at a rate of 1.4% on total gross income with no ceiling, but after an annual deduction of EUR5,768.88, effective from 1 January 2016. Employers are not subject to dependence insurance contributions.

Self-employed individuals must register for social security pur­poses. The rates of contribution are approximately the same as those for employers and employees combined.

Totalization agreements. As an EU member state, Luxembourg applies new EC Regulation No. 883/2004 on the coordination of social security systems as well as EEC Regulation No 1408/71. In addition, Luxembourg has entered into bilateral social security totalization agreements with the following jurisdictions.

Albania                            India                                  Slovenia

Argentina                        Macedonia                        Tunisia

Bosnia and                      Moldova                           Turkey

Herzegovina                    Montenegro                      United States

Brazil                               Morocco                           Uruguay

Canada                            Quebec                              Yugoslavia

Cape Verde                     Serbia                                (former)

Chile

Luxembourg has signed bilateral social security agreements with Japan and the Philippines, but these agreements have not yet entered into force.

Tax filing and payment procedures The tax year corresponds to the calendar year.

Taxpayers must file annual income tax returns by 31 March 2016 for income earned in 2015. The filing deadline may be extended on the request of a taxpayer.

Special rules apply to certain taxpayers. For example, employees who are subject to withholding tax and who do not have another source of income must file tax returns only if their annual taxable remuneration exceeds EUR100,000. The employer must with­hold wage tax.

Single nonresident taxpayers earning Luxembourg-source salaries and pensions must file tax returns if their taxable annual income exceeds EUR100,000 and if they have been employed continu­ously during nine months of the tax year. Married nonresidents who are jointly taxable must file tax returns if their joint salaries and pensions exceed EUR36,000.

Under certain conditions, nonresident taxpayers can elect to be treated as Luxembourg resident taxpayers to qualify for the same deductions and allowances. The request is made in the taxpayer’s income tax return.

Self-employed individuals must make quarterly prepayments of tax in amounts that are fixed by the tax authorities based on the individual’s most recent final assessment.

Tax treaties

Most of Luxembourg’s tax treaties provide double tax relief through the exemption-with-progression method. However, inter­est, dividends and royalties are subject to tax credit rules. Luxem­bourg has entered into double tax treaties with the following jurisdictions.

Andorra (a)                     Isle of Man                  Russian

Armenia                          Israel                            Federation

Austria                            Italy                              San Marino

Azerbaijan                       Japan                            Saudi Arabia

Bahrain                            Jersey                           Seychelles

Barbados                         Kazakhstan                   Singapore

Belgium                           Korea (South)              Slovak Republic

Brazil                               Laos                             Slovenia

Bulgaria                           Latvia                           South Africa

Canada                            Liechtenstein                Spain

China                               Lithuania                      Sri Lanka

Croatia (a)                       Macedonia                   Sweden

Czech Republic               Malaysia                      Switzerland

Denmark                         Malta                            Taiwan

Estonia                            Mauritius                     Tajikistan

Finland                            Mexico                         Thailand

France                             Moldova                      Trinidad and

Georgia                           Monaco                        Tobago

Germany                         Mongolia (b)                Tunisia

Greece                             Morocco                      Turkey

Guernsey                         Netherlands                  United Arab

Hong Kong SAR            Norway                        Emirates

Hungary                          Panama                        United Kingdom

Iceland                             Poland                          United States

India                                Portugal                       Uzbekistan

Indonesia                         Qatar                            Vietnam

Ireland                             Romania

  • These double tax treaties will be applicable from 1 January 2017.
  • Mongolia denounced the double tax treaty, which no longer applies, effective from 1 January 2014.

Luxembourg has voted for the ratification of tax treaties with Argentina and Ukraine. These treaties will enter into force after the ratification process is completed by both parties to the trea­ties.

Luxembourg has signed tax treaties with Albania, Brunei Darussalam, Kuwait, Senegal, Serbia and Uruguay, but these treaties have not yet been ratified.

Tax treaty negotiations with Botswana, Cyprus, Egypt, Kyrgyzstan, Lebanon, New Zealand, Oman, Pakistan and Syria have been announced.

Residents deriving income in non-treaty countries are in princi­ple entitled to a credit for foreign taxes paid, up to the amount of tax imposed by Luxembourg on the foreign-source income.

Frontier workers. Luxembourg has entered into Memoranda of Understanding with Belgium and Germany with respect to fron­tier workers. Under the memorandum with Germany, Luxembourg maintains full taxation rights for employment income if German frontier workers work less than 20 days during a calendar year outside Luxembourg. The same applies to Belgian frontier work­ers if they work less than 25 days during a calendar year outside Luxembourg.

Temporary visas

Luxembourg offers temporary transit visas and short-stay visas (visa de court séjour). A transit visa is valid for travelers passing through Luxembourg. A short-stay visa is valid for persons (em­ployed and self-employed) who stay in Luxembourg for a short period and do not derive income in Luxembourg, such as tourists, students enrolled in training courses in Luxembourg for less than three months and people on business trips.

The short-stay visa can be issued for a single entry or multiple entries. In the event of multiple entries, the total duration of the stay cannot exceed 90 days over a period of 6 months. The maxi­mum period for a visa during which authorized visits can be made is one year.

The renewal of visas depends on the situation of the visa holder. In general, renewals are granted for one year.

Residence authorizations

The law on the free movement of EU citizens and on immigration policies, dated 29 August 2008 and subsequently amended, cov­ers residence authorizations, which are work and stay permits for citizens outside the EU, EEA or Switzerland.

Under Luxembourg law, nationals of EU member states (with the exception of Croatia), EEA states (Iceland, Liechtenstein and Norway) or Switzerland do not need a residence authorization to perform their professional activities in Luxembourg.

Since 1 January 2014, nationals of Bulgaria and Romania are no longer required to hold a work permit. Effective from 1 July 2015, nationals of Croatia are also no longer required to hold a work permit.

Residence authorizations are not required for spouses (regardless of their nationality) of EEA or Swiss citizens who reside in Luxembourg. This exemption also applies to spouses (regardless of their nationality) of Luxembourg citizens resident in Luxembourg.

Luxembourg immigration requirements vary depending on the citizenship of the individuals and the length of their stay.

Citizens of the EU, EEA or Switzerland

Right to move and reside up to three months. Citizens of the EU, EEA or Switzerland and their family members (regardless of their nationality) may move to and reside in Luxembourg for a period of up to three months without any conditions other than the requirement to hold a valid identity card or passport. An entry visa may be requested for family members who are themselves third-country nationals.

Right of residence for more than three months. Citizens of the EU, EEA or Switzerland have the right of residence in Luxembourg for a period of more than three months if they sat­isfy either of the following conditions:

  • They are workers or self-employed persons.
  • They can provide proof of sufficient resources for themselves and their family members, and they have valid health insurance (as of 1 January 2016, the amount that can be requested is the guaranteed minimum income, which is EUR1,348.18 per month for one adult).

Since the end of the transitional period on 1 January 2014, citi­zens of Bulgaria and Romania no longer need to hold a work permit.

This transitional period ended on 30 June 2015 for citizens of Croatia.

If the planned period of residence in Luxembourg exceeds three months, the individuals concerned and their family members must register with the communal administration within three months after the date of arrival. A registration certificate is then delivered. Family members who are themselves third-country nationals must request a residence card from the municipality within three months after the date of arrival. The residence card of a family member is valid for five years.

After a continuous period of five years of legal residence in Luxembourg, citizens of the EU, EEA or Switzerland and their family members (regardless of their nationality) have the right of permanent residence (on request).

Third-country nationals

Conditions of entry, exit and residence up to three months. In principle, the third-country national must personally request the residence authorization and submit it to the competent authorities before entry into Luxembourg.

Third-country nationals may enter and reside in Luxembourg up to three months within a six-month period provided that a valid passport and visa (if applicable), sufficient resources and health insurance are presented. These nationals must declare their entry into Luxembourg with the communal administration within three days after the date of arrival (no declaration is necessary for tour­ists residing in hotels). If they want to exercise employment or self-employment activities, these nationals need a residence authorization.

However, third-country nationals do not need an authorization if they come to Luxembourg for less than three months within one calendar year for business trips, if they are working for the same group of companies, or if they are working as, among others, artists, sportsmen or academic lecturers.

Conditions of residence for more than three months. Third-country nationals have the right of residence in Luxembourg with a valid passport and visa (if applicable) for a period of more than three months if they obtain a residence authorization before their entry. In addition, these nationals must declare their entry with the municipality within three days after their date of arrival.

Workers with employment contracts. A residence authorization allowing third-country nationals to work in Luxembourg is granted if the individual has entered into an employment contract and if several other conditions are met. However, limited requirements apply to certain sectors of the economy experiencing substantial labor shortages.

The residence authorization is valid for a period of one year in one profession and one business activity but it is valid for any employer. It can be renewed for a two-year period.

Workers temporarily assigned for cross-border services. Comp anies established in another EU/EEA member state or in Switzerland can freely assign their workers (regardless of their nationality) to Luxembourg for the rendering of cross-border services (these are services provided in Luxembourg by workers for employers established in another EU/EEA member state or Switzerland) if these workers are authorized to work and stay in their home country for the duration of the assignment.

Third-country nationals temporarily assigned to Luxembourg by companies established outside EU/EEA member states or Switzerland for the rendering of cross-border services must have a residence authorization that is issued on request of the home-country company.

Workers temporarily assigned to a company group. On request of the host company, residence authorizations are granted to third-country workers who are assigned between intragroup entities.

Highly skilled workers. The Blue Card Directive for highly skilled workers (2009/50/EC) was transposed into Luxembourg legisla­tion in February 2012. The EU Blue Card is granted to third-country highly skilled workers for a period of two years (renew­able on request) if they have concluded an employment contract of at least one year, have a higher education qualification or at least five years of higher professional experience and earn at least 1.5 times the Luxembourg average gross annual salary (EUR 73,296 in 2016). This amount is 1.2 times the Luxembourg average gross annual salary (EUR 58,636.80 in 2016) for certain professions.

Self-employed persons. Residence authorizations for a maximum period of three years (renewable) are granted to third-country self-employed persons if the following conditions are satisfied:

  • They have the professional qualifications and hold a business license or any adequate professional authorization.
  • They have sufficient resources and accommodation.
  • The exercise of the independent activity benefits the economic interests of Luxembourg.

Other categories of residence authorization. Under certain con­ditions, residence authorizations are granted to, among others, the following persons:

  • Third-country students
  • Exchange students
  • Unremunerated trainees
  • Researchers
  • Sportspersons
  • Inactive persons
  • Other persons for exceptional reasons (for example, medical treatments)

EC long-term resident status. Third-country nationals can obtain long-term resident status if they have five years of legal and continuous residence in Luxembourg before the submission of the relevant application. The EC long-term resident status is valid for a period of five years, and is automatically renewed on request.

Steps for obtaining residence authorizations

General. When hiring foreign and Luxembourg wage earners, employers must notify the Labor Administration (Agence pour le développement de l’Emploi, or ADEM) of all job vacancies within three working days before publication in the press. A spe­cial form, called “Job Vacancy Declaration” (“Déclaration de Poste Vacant”), is used to notify the ADEM of the vacancy.

After the decision to hire a person is made, certain administrative formalities must be fulfilled, or a residence authorization must be obtained, depending on the citizenship of the prospective employ­ee, as outlined above.

Employers must inform the Social Security Registration Authority (Centre Commun de la Sécurité Sociale, or CCSS), by use of the “Entry Declaration” (“Déclaration d’Entrée”) form, to have an employee affiliated with social security.

Frontier workers. Frontier workers include any employed or self-employed person who pursues his or her occupation in one EU member country and who resides in another member country to which he or she returns daily or at least once a week.

Frontier workers are not required to comply with any special formalities.

Application for a residence authorization. Before arrival, the foreign worker must submit a written request for a temporary residence authorization to the Ministry of Immigration. The re­quest must be sent together with a certified copy of the passport, birth certificate, police record extract, curriculum vitae, diplo­mas, employment contract and a motivation letter (letter providing information on the foreign worker’s motivation to work for a certain employer).

Within 90 days after the date the temporary residence authoriza­tion (autorisation de séjour) is issued by the Ministry of Immigration, the foreign worker must either request a visa (if applicable) or enter Luxembourg (if a visa is not required). The entry must be declared with the communal administration within three days after the date of arrival.

Within three months after the date of arrival, the foreign worker must submit a form to obtain a definitive residence authorization called “Issuing Request for a Residence Authorization” (“Demande en délivrance d’un titre de séjour”). The form must be sent to the Ministry of Immigration together with the following:

  • A certified copy of the temporary residence authorization
  • An arrival declaration to the communal administration
  • A medical certificate issued by a Luxembourg doctor
  • Proof of suitable accommodation in Luxembourg
  • A recent photo (biometrical)
  • Proof of payment of a EUR80 stamp duty, which must be wired to the bank account of the Ministry of Immigration

The validity period of the definitive residence authorization is one year from the date of registration with the municipality. Two months before the expiration of the authorization, the Ministry of Immigration notifies by letter the foreign worker of the formali­ties to be followed to obtain a renewal of the authorization. The validity period for the first renewal is two years, while the valid­ity period for subsequent renewals is three years.

Family and personal considerations

Family members. An expatriate worker may be accompanied to Luxembourg by his or her spouse and children. The application for the stay permit for each family member is submitted to the Ministry of Justice in Luxembourg jointly with the expatriate worker’s request.

Family members who are EEA or Swiss nationals need only request a registration certificate.

Foreigners’ identity cards are required for spouses and any chil­dren older than 15 years of age.

An expatriate’s work permit is not valid for his or her spouse or children. For any family member wanting to work in Luxembourg, an individual work permit is required.

Children accompanying an expatriate worker to Luxembourg may attend any school in Luxembourg.

For some permits, a stay permit for family members can be requested only after a waiting period.

Marital property regime. Three main marital regimes are available in Luxembourg. A marital contract registered with a notary pub­lic is required to elect either of the following regimes:

  • The universal co-ownership regime (la communauté universelle), under which all assets are owned in common by both spouses, regardless of whether the assets were acquired before or during the marriage
  • The separate ownership regime (la séparation de biens), under which each spouse retains sole title to assets and wealth he or she acquires before and during the marriage

The default regime is la communauté réduite aux acquêts, under which assets are owned in common, except assets acquired before the marriage and assets acquired during the marriage through inheritance and donation.

In general, Luxembourg recognizes marital property agreements concluded under foreign law.

Forced heirship. Forced heirship rules apply in Luxembourg to protect the descendants. The forced heirship rules are summa­rized in the following table.

Number of children Heirship reserve Free reserve
1 1/2 1/2
2 2/3 1/3
3 3/4 1/4

If no descendants exist, the entire legacy can be legated to the surviving parent or other persons.