Posted on 08 August 2024
Taxation of Non-Resident Income in Luxembourg
Learn how the income of non-residents is taxed in Luxembourg. Discover the tax rules, tax rates, and international tax treaties that may affect your tax obligations.
1. Definition of Non-Resident Status
Non-resident status is granted to individuals who do not permanently reside in Luxembourg but earn income there. According to Luxembourg tax law, a person is considered non-resident if they spend less than 183 days per year in the country.
2. Types of Taxable Income for Non-Residents
Here are the main types of income concerned:
- Employment Income: Salaries earned for work performed in Luxembourg.
- Real Estate Income: Income generated from real estate properties located in Luxembourg.
- Investment Income: Dividends, interest, and other financial income from Luxembourg sources.
Assimilation to a Luxembourg Resident for Cross-Border Workers
Non-resident cross-border workers can be assimilated to tax residents under certain conditions. To be assimilated, a cross-border worker must demonstrate that 90% or more of their worldwide income is taxed in Luxembourg, or that their foreign income does not exceed 13,000 euros per year. This assimilation allows them to benefit from the same tax deductions as residents.
4. Tax Rates for Non-Residents
Non-residents are subject to the same progressive tax rates as residents, but only on their Luxembourg-source income. In 2024, tax rates range from 0% to 42%, depending on income brackets.
5. International Tax Treaties
Luxembourg has signed tax treaties with many countries to avoid double taxation. These treaties determine which country has the right to tax certain types of income and may offer tax credits for taxes paid abroad. International tax treaties play a crucial role for non-residents, especially those earning income in multiple countries.
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