How to prepare the Luxembourg tax return: questions / answers

In Luxembourg, filing a personal tax return is mandatory in certain cases only. In order to understand if you have to file a return, our personal tax experts can answer your questions. if you have to file a return, Fiduciaire lpg has a service for the prepartion and filing of personal tax returns.

Residents and non-residents have to understand if they are obligated to file a tax return or if there is an advantage to do so. This article answers questions commonly asked to our personal tax advisors.

How to file your tax return better

1- Who has to file a tax return in Luxembourg?

2- Which documents need to be provided with the tax return?

3- What expenses can be deducted?

4- Which tax class applies to me?

5- Is there non-taxable income?

6- Do I have to file every year?

7- I am a non-resident. Do I have to file a tax return?

8- How and where to file my return?

9- What is the deadline?

10- Where can I find the return?

11- I would like assistance. Where can I find it?

1- Who has to file a tax return in Luxembourg?

In Luxembourg, residents and non-residents are not obligated to file a tax return unless:

·   Net taxable income superior to 100 000€ a year.

·   Net taxable income over 36 000€ a year for people in class 1 or 2 with several sources of taxable income in Luxembourg.

Example: In the case of a married couple, one individual earning 25.000€ a year and the other 20.000€ a year. The cumulative income is over 36.000€ a year. They must file a tax return.

·   Taxable income over 30.000€ for people in class 1A with several sources of taxable income in Luxembourg.

Example: a widow who earns 22.000€ a year is not obligated to file a tax return because her income is below 30.000€ a year.

·   600€ a year for revenues not subject to withholding tax

Example: someone with rent income over 600€ a year

·   Net investment income subject to withholding tax over 1500€

Example : dividends received for a gross amount of 7.000€

·   Resident having been temporarily granted class 2, taxed collectively with a non-resident partner.

·   Net taxable income with more than 1.500€ of director’s fees or royalties.

Explanations : if the person is a resident, the tax return is mandatory from 1.500€. For a non-resident, the withholding tax is in principle final up to 100.000€

·   The tax administration requests a tax return.

2- Which documents need to be provided with the tax return?

·   In the case of a legal partnership and on the condition that the partners are filing jointly, the tax return must be filed with a copy of the partnership certificate (only the first time) and a joint residence certificate (every year).

·   All certificate of income gained : salary certificate, pension certificate, bank certificates, annual accounts of professional activity…

·   Justification for all deductible expenses requested (except obtention costs and transportation costs): bank certificates, insurances certificates (article 111 and 111bis)…

3- What expenses can be deducted?

On the return, certain lines are reserved for deductions that can be :

·   Transportation costs with a maximum of 2.574€ if they have not been born by the employer (rail pass, travel costs reimbursements…)

Example: the commute between home and work is included in that amount and depends on the distance between home and the workplace. Every year, the administration publishes a chart with the deductible amounts.

Chart with the number of remoteness units;

Chart indicating the deductible amount following the number of remoteness units (page9);

For example, ta tax payer living in Differdange and working in Frisange will be able to deduct 1.782€. It corresponds to 22 remoteness units (the first four are not deductible).

Non-resident are generally at the cap of 2.574€

·   Interest subsidy granted by the employer is capped at maximum 3.000€ per person for a mortgage on the main residence and at 500€ for a consumer credit,

>> Example, interest credit for a mortgage

Interests on a mortgage

Interests on mortgages are always deductible (except on a second residence) but in different ways depending on the nature of the property that is financed. When it comes to interests paid on a main residence, their deductibility is capped based on the date of occupancy and the number of people in the same tax household. The deductibility varies between 1000€ and 2000€ per person. Interests paid for the financing of an investment property are not capped and can be fully deducted from the rental income generated by the property.

·   Interests paid (other than on a mortgage).

Example : loan granted for the purchase of a car, interest on bank credit line. Certificates are in principle sent by the bank.

·   Insurance premiums

The two types of special expenses capped together at 672€ per year and per person in the household.

·   The life insurance single premium on a policy that covers a mortgage contracted for the purchase or construction of a real estate property leads to an increase on the 672€ cap of between 6.000€ and 31.200€ depending on the age and number of children.

For example: a 32 years old person with two children can deduct a single premium policy of 9.744€ (base amount of 8.400€ + 672€ per year over 30, thus 2*672€).

A 55 years old person with 5 children can deduct a single premium policy of maximum 31.200€ (maximum amount deductible) following the chart below:

(*) Amount per year over 30 years old.

(**) Cap.

·   Other social security contributions like the buyback of years for example.

Explanations : these buybacks are used to complete an uncomplete career for mainly family reasons like the education of children or the help given to a parent gravely handicapped.

·   Personal contributions to a company pension plan up to 1.200€ per year.

·   Childcare expenses or domestic expenses (maid for example) capped at 5.400€ per year.

·   Tax moderation for children capped at 922,50€ per child.

·   The tax bonus for children that allow for the prolongation for two years of the tax moderation if the household taxable income is below 76.600€ per year.

·   Exceptional expenses

4- Which tax class applies to me?

There are three tax classes : 1, 1A and 2. The tax class depends on the age, family situation and number of children.

Class 1 

·   Single without children,

·   Separate or divorced without children (except for people divorced for less than three years)

Class 1A

·   Single with children

·   People 64 and older

·   Widows and widowers

·   Separate or single with children (except people divorced for less than three years)

·   Married couples with less than 50% of their income in Luxembourg

Class 2

·   People taxed jointly (legal partnerships or marriages),

·   Widows and widowers who lost their partner less than three years ago,

·   Divorced or separated during the three years preceding the tax year.

5- Is there non-taxable income?

According to article 115 of the tax law, some revenue is tax exempt. For example:

·   Childbirth allowances and child benefits under the limits set by the law;

·   Work hours performed on Sundays, at night or on public holidays and overtime;

Explanations : the annual salary certificate given by the employer must mention these amounts, which then become deductible from the tax base.

Hospital staff, for example, work at night and on Sundays. This extraordinary schedule must be specified in collective agreements.

·   Gifts offered to employees : for employees with more than 25 years of seniority, the value of the gift cannot exceed 2.250€; for employees with more than 40 years of seniority, the value of the gift cannot exceed 3.400€ and for employees with more than 50 years of seniority, the value of the gift cannot exceed 4.550€.

·   The capital and redemption value of an individual life insurance contract. 

6- Do I have to file every year?

Theoretically, a person that is not obligated to file a return but still files one is not obligated to file another one the next year. In practice the tax administration will probably ask for the return because the person will be in their database.

However, the person can inform the administration that he no longer wishes to file a return and the administration will withdraw the file from the database.

7- I am a non-resident but working in Luxembourg. Do I still have to file a return?

Yes. If you are an employee in Luxembourg and you meet the diverse conditions, you are obligated to file a tax return in Luxembourg:

·   If one of the spouses or partners has an income over 100.000€.

·   If the household has several sources of taxable income in Luxembourg and that it is over 36.000€ (class 1) or 30.000€ (class 1A).

·   If you are married and have asked for joint taxation before or during the tax year: this materializes by the inscription of a rate on the tax card.

·   If you receive director’s fees from Luxembourg for a gross amount over 100.000€.

·   If you receive taxable income in Luxembourg that is not subject to withholding tax.

8- How and where to file my return?

There are two ways to fill and file the return :

·   In paper form: you have already filed a tax return; you will receive a return to fill and file (form 100).

·   Electronically: you can also fill and file the return on the internet.

The tax return is to be filled with the competent tax office.

·   For French resident, the competent tax office is office Y.

·   For German resident, the competent tax office is office Z.

·   For all other foreign residents, the tax office is office X.

9- What is the deadline?

Yes. The return is to be filled before March 31^st of the following year.

An extension can be asked to the tax administration and will be granted or refused based on the arguments.

10- Where can I find the return?

The form 100 is available on the direct tax administration’s website.

11- I would like assistance. Where can I find it?

In order to help you prepare your tax return, there are different resources, mainly the guides provided by the tax administration but also chamber of employees. You can use the “help” section put in place by the administration.

If you would simply like to delegate that task and receive guidance, our experts on personal taxation are available.