Until recently, married couples had no choice but to file a joint tax return, i.e. as a single taxpayer. These couples were automatically taxed in class 2 - in accordance with the tax rates for the highest salary, and at a fixed rate of 15% for the couple's second salary. Tax was levied at source on each of the salaries and the completion of a tax return - mandatory in most cases - could allow tax deductions.
Since fiscal year 2018, the Luxembourg legislator has allowed a derogation from this form of joint taxation for married couples. From now on, married taxpayers can choose to be taxed individually. In practice, this means being considered single, i.e. being taxed in class 1 on the basis of your own income. The deduction limits are divided equally between the two spouses. This system is similar to the individual taxation system as it applies in the absence of marriage.
For Alexandre André, an accountant specialising in the taxation of individuals with accounting firm LPG in Luxembourg “this possibility does not offer any particular financial interest. When comparing the two options - individual and joint taxation - the difference on the overall amount of household tax is negligible.
“The main motivation of households that opt for individual taxation is to be taxed more fairly based on their individual salaries,” continues Alexandre, who explains that more and more couples are now managing their money independently. They can therefore be attracted by a distribution of contributions that better reflects their personal income.
Characterised by less solidarity and more impartiality, individual taxation also meets the needs of couples living separately or in the process of divorce.
It should be noted, however, that individualization can be totally individualized or provide for a reallocation of income between spouses with a common rate recorded on the spouses' withholding tax forms.
In conclusion, this tax specialist is quick to point out that “it is impossible to provide advice without a thorough study of the situation". Indeed, the amount of tax depends on many factors: salary, dependent children, tax deductions, the nature of the income received...
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