Luxembourg - Tax Guide for Freelance Contractors

Tax residents in Luxembourg:         are liable to pay Luxembourg tax on their worldwide income,
Non tax residents in Luxembourg:  are liable to pay tax on Luxembourg source income.

Individuals will be regarded as tax residents:

• if their customary abode is in Luxembourg,
• if their centre of economic interests is in Luxembourg.

Married persons’ income is aggregated for tax purposes. Unmarried taxpayers living together who have registered a partnership agreement (“civil partners”) are not taxed jointly, but can be upon request.

Taxable income includes:

• employment income,
• most benefits in kind,
• income from property,
• dividends.

Certain deductions are permissible for 2010 including:

• basic personal allowance of EUR 480,
• premiums for life insurance, accident and sickness policies,
• individual pension scheme,
• alimony and annuities,
• childcare and housekeeping costs,
• charitable contributions,
• interests on personal and mortgage loans,
• allowance for professional travel with a private car,
• employment income expenses up to a ceiling.

Tax credits available for 2010 include:

• EUR 300.00 for employees paid via the employer,
• EUR 750.00 for single-parent paid via the employer,
• EUR 300.00 for retired persons paid via the competent pension authorities,
• EUR 300.00 for independents requested when filing the tax return,
• EUR   76.88 as supplementary child bonus, paid monthly by the Luxembourg family allowance authority: this is considered non-taxble,
• Tax exemption on interest income from household savings banks.

Income tax rates for 2010:

There are 17 individual income tax brackets. They range from:

•   0.00% on income up to EUR 20'000 depending on the tax class,
• 38.95% maximum marginal tax rate increased by 2.5% for the employment fund.

Filing date:

Tax returns are due by 31st of March of the following year.