Luxembourg Tax Rates
Taxation of Luxembourg companies is calculated on several criteria which vary according to the regions. The basic rate is 20% for companies with an income below EUR 15,000. Companies with a higher income level are taxed a basic rate of 21%. In addition to the basic rate tax, there is a contribution for employment of 7% and a municipal tax ranging from 6 to 12%. The total rates payable are shown below:
|The company’s income||Taxation (base rate + contribution + municipal tax)
|Less than EUR 15 000||33-39%|
|Higher than EUR 15 000||34-40%|
Capital gains are taxed in the same way as corporate tax.
Tax deductions may be made in respect of payments made to subsidiaries, certain fees and depreciation.
The Government has introduced measures to promote entrepreneurship and grants are provided to SMEs in the hotel and catering industry. Furthermore, recently formed companies pay 25% less local authority income tax and commercial tax for their first eight years.
VAT is charged at 15% and lower rates exist for the following specific sectors:
- 6% on bikes and household services.
- 3% for pharmaceuticals, newspapers, food, books and admission fees for cultural and sports activities as well as for the hotel and catering industry.
- 0% on exports and financial, real estate and medical services.
Personal income tax is levied at the following tiered rates:
|Personal income (EUR)||Tax rate|
|0 to 11,265||0%|
|11,266 to 13,173||8%|
|13,174 to 15,081||10%|
|15,082 to 16,989||12%|
|16,990 to 18,897||14%|
|18,898 to 20,805||16%|
|20,806 to 22,713||18%|
|22,714 to 24,612||20%|
|24,622 to 26,529||22%|
|26,530 to 28,437||24%|
|28,438 to 30,345||26%|
|30,346 to 32,253||28%|
|32,254 to 34,161||30%|
|34,254 to 36,069||32%|
|36,070 to 37,977||34%|
|37,978 to 39,885||36%|
|39,885 to 41,793||38%|
|41,794 and above||49%|
Life insurance premiums, pensions and maintenance payments, annuities, daycare expenses, donations and interest on personal loans can generally be deducted for tax purposes.
Accounting Requirements In Luxembourg
Luxembourg’s tax year runs from 1 January to 31 December, and company accounting is regulated by European Union standards. The country has three general principles for its accounting: clarity and compliance, honesty and continuity.
Financial statements must include a balance sheet, a profit and loss account and an appendix. Accounts may be prepared in one of the three official languages of Luxembourg (Luxembourgish, French, or German).
Small companies may file less onerous accounts, unlike larger entities which must also publish a proposal for the allocation of profits, the identity of directors and auditors and a management and supervision report.
Finally, medium and large businesses must undertake an annual audit of their accounts, whereas small companies’ accounts may be reviewed by a Public Accountant.