Posted on 19 March 2024

Tax differences between marriage and PACS in Luxembourg: everything you need to know!

For resident couples, the main difference lies in the way income is taxed.

It should be noted that, from a tax point of view, a civil union couple and a married couple, both benefiting from the same income and deductions, will ultimately pay the same amount of tax on joint tax returns. 

Tax status of married couples: Tax class and joint returns

For married couples, one spouse is taxed at tax class 2, and the other at a flat rate of 15% on their monthly payslips. For the annual tax return, tax class 2 is applied to all household income. This method of taxation is uniform for all married couples resident in Luxembourg.

Married cross-border couples are taxed at source at a flat rate and benefit from the tax class when they file their tax returns.

Tax status of civil union partners: Initial status and advantages of joint declaration

On the other hand, partners in a civil partnership initially retain the tax status of "single" on their monthly payslips. In other words, tax class 1 or 1a. However, when they file their joint tax return, PACS couples can access the same benefits as married couples, including access to tax class 2 and other advantageous tax deductions.

Comparing the tax benefits of marriage and PACS

The main difference lies in the way partners are taxed on their monthly income and when they file their annual tax return. While married couples are taxed jointly as soon as they receive their income, civil union partners initially retain their individual tax status until they choose to file their tax return jointly.

If we compare two couples, one married and the other civil union, with the same salaries, the monthly withholding tax for the married couple will be lower than for the civil union couple. As a result, it is likely that the married couple will have to repay some of their tax when they file their annual tax return, depending on the deductions that apply. 

For the civil union couple, on the other hand, they will probably pay too much tax at source because of their initial individual tax status, but will be able to recover the overpayment thanks to the joint tax return.


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