LUXEMBOURG
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TAXATION OF NON-RESIDENTS
On 28 April 2010, the Luxembourg government introduced a new Law in order to bring certain Luxembourg tax provisions regarding non-residents into line with European Union law.
Non-resident individual taxpayers were subject to progressive income tax rates with a minimum tax rate of 15% on their Luxembourg source income.
The same income derived by a Luxembourg resident is not subject to a minimum tax rate. In consequence, the non-resident was not able to benefit from the tax exempt band of the progressive income tax schedule. In addition to this, non-resident individual taxpayers may only elect to be treated as resident taxpayers if they derive at least 90% of their professional income in Luxembourg.
The new Law limits the tax rate applicable to non-resident individual taxpayers in respect of income earned in Luxembourg of a non-professional nature. As a non-resident taxpayer, it is now possible to choose either the 15% minimum rate OR the progressive rate as per the tax tables. However, the progressive rate is calculated by adding the actual income to a figure of €11,265 (the tax exempt band) to arrive at a hypothetical taxable income and then the progressive rate as per the tax tables is applied.
The total income will be taken into consideration to determine whether the threshold of 90% is met as regards the election to be treated as resident taxpayers.
There have been some exciting changes in our Personal Tax department which you can read about in one of our News items. Meanwhile, any contact link from this page will bring you to a new contact page and directly to Fiduciaire Jean-Marc Faber’s office where our expanded team of personal tax experts is waiting to help you.