Tax Deductions
Granted to residents and non-residents taxed on an assessment basis
Assessment basis = on the basis of a tax declaration
This table is provided for information purposes only. Please contact us for personal advice.
| Standard deductions applicable to salaried employees |
Resident | Non-Resident(1) | Annual Limits |
| Out of pocket expenses (lump sum amount) | OK | OK | 540 € |
| Travel expenses (lump sum amount) | OK | OK |
from 396 € to 2.970 € depending on the distance from home to the place of work From 1 January 2013, the lump sum deduction for travel expenses, for the first 4 distance units, is abolished. |
| Special expenses (fixed minimum amount) | OK | OK | 480 € |
| Special expenses in place of the fixed minimum amount (€ 480) | |||
| Maintenance payments after divorce | OK | If assimilation | 23 400 € |
| Debit interest in relation with a consumer loan or a bank account | OK | If assimilation |
672 € per person in the household
From January 1, 2013: |
| - Insurance premiums – life – death – accident – invalidity – health – 3rd party liability - Contribution to recognised mutual assistance associations - Young persons savings - Tax efficient products : : for you to complete with your product range |
OK | If assimilation | 672 € per person in the household |
| Premiums paid under a contract for a private retirement pension Product : for you to complete with your product range |
OK | If assimilation | from 1.500 € to 3.200 € as a function of the age of the insured |
| Payments made to home-buyer savings and loan companies Tax efficient products : for you to complete with your product range |
OK | If assimilation | 672 € per person in the household |
| Debit interest in relation with a property mortgage loan for own occupation | OK | If assimilation (amount not deducted directly but taken into account in the calculation of the tax rate applied to Luxembourg revenues) | from 750 € to 1.500 € as a function of the period of occupation (multiplied by the number of persons in the household) |
| Single premium residual loan balance insurance Tax efficient products: for you to complete with your product range |
OK | If assimilation | Increase of 6.000 € (doubled in the case of joint taxation) increased by 1.200 € for each child that is part of the household.
A further increase is granted for tax payers aged over 30 years at the time the policy is taken out, equal to 8% of the standard increase multiplied by the difference between 30 years and the age of the tax payer when the policy is taken out.
|
| Personal contribution to an employer's complementary pension plan Tax efficient products: for you to complete with your product range |
OK | OK | 1 200 € |
| Charitable donations (>€ 120) | OK | If assimilation | 20% of net revenue up to a maximum of 1.000.000 € |
| Additional allowances | |||
| Domestic services expenses and child-minding costs | OK | If assimilation | 3.600 € (attention: limit of 300 € per month) |
| Expenses for the maintenance and education of dependent children who are not part of the household (maintenance payments) | OK | OK | 3 480 € |
| Single parent allowance for tax payers in the tax category Class 1a | OK | OK | Withdrawn. Replaced by a single parent tax credit from the year 2009 |
Other Tax News for 2013
Income tax rate increases to 40% for certain incomes
The current income tax grid for individuals is complemented with a new bracket of 40% for taxable income exceeding EUR 100,000 in tax class 1 and 200.000 EUR in tax class 2.
Increase of the solidarity surcharge
For individual taxpayers, the unemployment surcharge has been increased from 4% to 7% (for the portion of taxable income below 150.000 EUR in tax class 1 and 300.000 EUR in tax class 2) and from 6% to 9% (for the portion of taxable income exceeding EUR 150,000 in tax class 1 and EUR 300,000 in tax class 2). The solidarity surcharge has been increased from 5% to 7% for companies.
(1) Non–Resident:
The assimilation treatment of a non-resident tax payer as a resident tax payer has the effect of allowing the person to deduct his/her special expenses and extraordinary charges in the same way as a Luxembourg resident.
It also allows foreign losses to be taken into account in order to determine the tax rate applicable to the Luxembourg revenues on their own.
(Example: mortgage loan interest in relation with the financing of the main residence outside the territory of Luxembourg.)
This assimilation leads equally to the integration of foreign revenues (e.g. foreign salary) in order to determine the tax rate, which can have a negative effect for the tax payer by resulting in a higher tax rate.
However, the Administration des Contributions Directes in any case applies the treatment that is most advantageous for the tax payer (assimilation or application of fixed minimum deductions).
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