Luxembourg Income Tax (2026): Residence, Rates, Impatriates

Who Luxembourg taxes as a resident

Under the income tax law, a person is a resident taxpayer if they have their tax domicile or habitual abode in Luxembourg. Residents are taxed on Luxembourg and foreign income; non-residents only on Luxembourg income. The tax administration describes tax domicile as the place where a person has a home under conditions showing they will keep and use it, and habitual abode as the place where a person stays in circumstances showing they remain there not only temporarily. A residence permit does not automatically mean tax residence. Guichet.lu adds that exempt income is not taxable as such but may be used to determine the tax rate.

impotsdirects.public.lu: Loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu (texte coordonné en vigueur au 1er janvier 2026) impotsdirects.public.lu: Résident / non-résident - A à Z impotsdirects.public.lu: Domicile fiscal - A à Z impotsdirects.public.lu: Séjour habituel - A à Z guichet.public.lu: The income tax return for natural persons (taxation by assessment)

The income tax scale printed for 2025 onward

The tax administration says its basic scale applies from tax year 2025. It is 0% on taxable income below €13,230 and 8% between €13,230 and €15,435. The page then lists further steps, each rate shown with its band, up to 38% between €51,795 and €54,090. From €54,090 it lists 39% up to €117,450; 40% up to €176,160; 41% up to €234,870; and 42% above €234,870. Another administration page says the latest scale adaptation took effect on 1 January 2025. The law text in force on 1 January 2026 prints a scale from 0% to 42%, marked as applicable from tax year 2025.

impotsdirects.public.lu: Tarif de base applicable aux personnes physiques (impôt sur le revenu) impotsdirects.public.lu: Barèmes - Administration des contributions directes impotsdirects.public.lu: Loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu (texte coordonné en vigueur au 1er janvier 2026)

Tax classes 1, 1a and 2

The tax administration places resident taxpayers in class 1, class 1a or class 2. Class 1 covers people in neither class 1a nor class 2, and its tax comes from the basic scale. Class 1a includes widowed people, people who get a tax reduction for children, and people aged at least 64 on 1 January of the tax year, unless they are in class 2. Class 2 includes spouses and partners taxed jointly; people widowed during the three years before the tax year; and people divorced or legally separated during the three years before the tax year, if they did not use this rule or a similar earlier one during the five years before that. The law sets class 2 tax at double the tax the scale gives on half of adjusted taxable income.

impotsdirects.public.lu: Classes d'impôt des contribuables résidents - A à Z impotsdirects.public.lu: Loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu (texte coordonné en vigueur au 1er janvier 2026) impotsdirects.public.lu: Frequently asked questions - Information for Residents

Married couples and a spouse living abroad

Resident married couples are automatically in class 2 unless they jointly opt for individual taxation. If one spouse is resident and the other is not, the administration places the resident in class 1, or in class 1a if the household includes children entitled to a tax abatement or the resident is aged at least 64 on 1 January of the tax year. Class 2 then applies only on a joint request by spouses not living apart, and only if the resident spouse earns in Luxembourg at least 90% of the household's professional income in the tax year.

impotsdirects.public.lu: Frequently asked questions - Information for Residents

Employment fund surcharge and social contributions

The tax administration says income tax is increased by a surcharge for the employment fund. Since tax year 2013 the rate has been 7%, and 9% above adjusted taxable income of €150,000 in classes 1 and 1a or €300,000 in class 2. The administration also prints a worked monthly pay example that uses parameters applicable on 1 January 2025. In that 2025 example the employee share was 0.25% for health insurance cash benefits, 2.8% for health benefits in kind and 8.00% for pension insurance. That pension figure may no longer apply: on its page about the 2026 changes to the pension scheme, the national pension insurance fund (CNAP) says the Chamber of Deputies adopted on 18 December 2025 a bill that raises the overall pension contribution rate from 24% to 25.5%. The notes to that 2025 example say the dependency insurance contribution is 1.4% of gross pay, excluding overtime supplements and reduced by an allowance, and is not tax deductible.

impotsdirects.public.lu: Fonds pour l'emploi - Administration des contributions directes impotsdirects.public.lu: Calcul d'une rémunération mensuelle nette - Salarié et pensionné cnap.public.lu: Informations autour de l'adaptation du régime de pension en 2026 (Caisse nationale d'assurance pension)

Tax card and withholding at source

Guichet.lu says resident employees who start work in Luxembourg get a tax card issued automatically after affiliation with the Joint Social Security Centre, within 30 working days on average. Employers and pension funds withhold tax according to the card. With several salaries there is a card for each employer. Except for married taxpayers who chose joint or individual taxation, who get an estimated rate, an additional card carries a fixed rate (guichet.lu page updated 17.01.2025): 33% for class 1; 21% for class 1a; and 15% for class 2. These fixed rates can be reduced on demand. Without a submitted tax card, tax is withheld on the basis of class 1 and cannot be lower than 33%. Over- or under-withholding can be corrected by annual adjustment or a tax return.

guichet.public.lu: Requesting or amending a tax card as a resident employee or pensioner

Temporary agency workers

Guichet.lu says that since 1 January 2022 temporary agency workers no longer need a tax card. Their salaries are subject to a 7.5% flat tax on the gross amount, less the social contributions. Temporary agency workers with a gross hourly wage above €25 must still request a tax card with form 162 F, and their tax is then withheld under the common scheme.

guichet.public.lu: Requesting or amending a tax card as a resident employee or pensioner

The impatriate exemption in the income tax law

The income tax law text in force on 1 January 2026, in the version of the exemption applicable from tax year 2025, exempts 50 per cent of the gross total annual remuneration paid by an employer to an impatriate, apart from the exempt cash benefits it lists and benefits in kind. The gross amount to which the 50 per cent applies cannot exceed 400,000 euros. An impatriate is an employee who usually works abroad and is seconded by a company of an international group outside Luxembourg to a Luxembourg company of the same group, or an employee recruited directly abroad by a Luxembourg company or one in another European Economic Area state. It does not apply to employees hired through a temporary work agency placement or a loan of labour.

impotsdirects.public.lu: Loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu (texte coordonné en vigueur au 1er janvier 2026)

Conditions the law attaches to that exemption

In that version, the exemption applies only if all the law's conditions are met. The impatriate must have tax domicile or habitual abode in Luxembourg. In the 5 tax years before entry into service, they must not have been tax domiciled in Luxembourg, lived less than 150 km from the border, or been subject to Luxembourg income tax on professional income. They must do the work for at least 75 per cent of working time, with fixed annual gross pay of at least 75,000 euros. Impatriates may not exceed 30 per cent of staff, except in companies under ten years old on 1 January. The law adds conditions on replacing staff, secondment and recruitment, not listed here.

impotsdirects.public.lu: Loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu (texte coordonné en vigueur au 1er janvier 2026)

What this page does not cover

This page does not cover VAT, property taxes, inheritance tax, double tax treaty results for a specific country, how non-residents are taxed and the option to be treated as a resident, tax classes for non-residents, individual taxation options for married couples, how tax is worked out for the class that covers widowed people, people who get a tax reduction for children and older taxpayers, employee tax credits, current employee social security contribution rates, every condition and employer duty of the impatriate exemption, or whether a particular person meets any condition. Check the official pages for them.