Posted on 05 September 2024
Everything you need to know about the fixed rate for cross-border commuters in Luxembourg
Find out about the rules and benefits of the flat rate for married cross-border commuters in Luxembourg. Learn how this rate affects your tax and the situations in which it may be more advantageous to remain in tax class 1.
For married cross-border couples, to qualify for tax class 2, certain conditions must be met in order to be treated as a Luxembourg tax resident. Here's what you need to know :
Conditions for being considered a Luxembourg resident :
- At least 90 % of the household's income must come from Luxembourg
- The household must receive less than 13 000 € net income from abroad (outside of Luxembourg).
- For Belgian residents only : more than 50 % of professional income must be earned in Luxembourg.
If one of these conditions is met, you may be considered a resident in Luxembourg and benefit from a fixed rate of tax at source, equivalent to tax class 2 for married cross-border commuters.
However, the flat rate is not always advantageous. It is generally beneficial when Luxembourg income exceeds income earned abroad. Otherwise, it may be more advantageous to remain in tax class 1.
It is also important to note that the tax rate is normally adjusted when your tax return is processed. However, a change in income from one year to the next does not always result in automatic adjustment of the rate, which can lead to surprises when you file your tax return.
Concrete examples (with the non-business allowance already deducted) :
Example 1 :
Johanna and Leo, married cross-border commuters working in Luxembourg, are taxed at a flat rate of 25 % :
Johanna's salary :
- Taxable amount : 100 000 €
Withholding tax : 25 000 €
Leo's salary :
Leo's salary :
- Taxable amount : 40 000 €
- Withholding tax : 10 000 €
Household taxable income : 140 000 €
Tax due : 33 837 €
Tax paid at source : 35 000 €
Refund : 1 163 €
The following year, Leo changed jobs and his income increased. The tax rate remained unchanged:
Johanna's salary :
- Taxable amount : 100 000 €
- Withholding tax : 25 000 €
Leo's salary :
- Taxable amount : 70 000 €
- Withholding tax : 17 500 €
Household taxable income : 170 000 €
Tax due : 46 356 €
Tax paid at source : 42 500 €
Amount to be repaid : 3 856 €
Example 2 :
Jérôme and Marie, living in France, with Marie working in Luxembourg and Jérôme in France :
Jérome's salary : 80 000 €
Marie's salary : 40 000 €
As French income is higher than Luxembourg income, it is preferable for Marie to remain in tax class 1 rather than file a joint tax return in Luxembourg.
Example 3 :
Stéphane and Vanessa, living in Belgium, with Stéphane working in Luxembourg and Vanessa being a housewife:
Stéphane's salary :
- Taxable amount : 50 000 €
- Withholding tax : 5 000 €
Household taxable income : 50 000 €
Tax due : 2 879 €
Tax paid at source : 5 000 €
Refund : 2 121 €
If you are in a similar situation, it may be worth staying in tax class 1 or adjusting your deductions at source to avoid surprises when you file your tax return.
