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.
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.
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).
Under the principles of LUXEMBOURG TAXATION a number of TAX DEDUCTIONS are available to the tax payer, which can be taken into account for the purposes of TAX PLANNING or TAX OPTIMIZATION.
How to take advantage of the available tax deductions in Luxembourg?
Retirement savings or pension savings, home savings plans, life assurance and taxation in Luxembourg
In Luxembourg contributions to retirement savings or pension savings, home savings plans (known as ‘épargnes logement’) and life assurance (also known as life insurance), as well as all personal insurances, are deductible from taxable income.
Taxation in Luxembourg: tax deductions for both residents and frontier workers / cross-border workers
Taxation in Luxembourg offers a number of possibilities to reduce the taxes you pay as a Luxembourg tax payer, whether you are a resident or a frontier worker / cross-border worker in Luxembourg.
EasyNext, your AXA Luxembourg Kirchberg insurance agency, offers you a range of products and provides tailored advice that will make Luxembourg taxation work in your favour. Together we will find the best solutions that combine investment return, provision for your future and insurance protection that will enable you to make regular savings (home savings plans, retirement savings or pension savings such as private pension plans or other complementary retirement plans, tax deductible children’s savings plans / tax deductible junior savings plans, etc.) and to insure the future of yourself and those closest to you (life insurance, death insurance, endowment insurance, mortgage loan insurance, private health insurance including mutual health insurance plans and other complementary health insurance or health care plans, income protection insurance or other loss of revenue insurance / loss of income insurance, etc.), all while being able to deduct the premiums / payments from your taxable income.
You will find in the AXA product range a great number of products that will enable you to take full advantage of the available benefits in terms of tax deductions.
Fix an appointment with your AXA Assurances Luxembourg Kirchberg insurance agency, in order to benefit from all our advice about taxation in Luxembourg.
Tax planning / tax optimization for Luxembourg residents and for frontier workers / cross-border workers in Luxembourg eligible for tax assimilation as a resident
- Art 111 bis LIR: tax deductions for pension savings or other complementary retirement plans (3rd pillar)
By taking out a complementary pension plan, you can reduce your taxable income each year. The tax deduction limits are dependent on the age of the person paying in to the retirement savings plan at the beginning of the tax year.
The tax deduction limits for a complementary retirement plan (3rd pillar) are the following:
- 1 500 EUR before 40 years
- 1 750 EUR between 40 and 44 years
- 2 100 EUR between 45 and 49 years
- 2 600 EUR between 50 and 54 years
- 3 200 EUR between 55 and 74 years
According to the rules of Article 111bis LIR, pension savings benefits can only be paid out from 60 years of age at the earliest and up to 75 years of age at the latest.
Where there are two contracts (one for each partner) the tax deduction limits are doubled. The person who takes out a policy for a complementary retirement plan and the insured have to be the taxpayer.
For more information contact your AXA Luxembourg Kirchberg insurance agency: EasyNext.
- Art 111 LIR: tax deductions for personal insurances
Third party liability insurance (or civil responsibility insurance), accident insurance, private health insurance (also known as private medical insurance,complementary healthcare or mutual health care), life insurance, death insurance, endowment insurance, mortgage loan insurance and certain children’s savings plans or junior savings plans (which are a tax deductible alternative to a bank savings account) can benefit from tax deductions for an amount of 672 EUR per person in the household per year.
For more information, contact your AXA Luxembourg Kirchberg insurance agency: EasyNext.
- Mortgage loan insurance / remaining balance, residual balance or outstanding balance insurance by payment of a single premium
When such remaining balance insurance is taken out on the basis of a single premium payment, the following tax deduction limits are applicable for the year in which it is taken out:
Do you wish to receive more information about our remaining balance insurance and the particular tax optimization treatment that can be applied? Then contact your AXA Luxembourg Kirchberg insurance agency: EasyNext.
- Payments made into a home savings plan (known as ‘épargne logement’)
Contracts taken out in order to finance the purchase of a plot of land or the construction, the acquisition or the transformation of a property within or outside the Grand Duchy of Luxembourg.
Thanks to the home savings plan (‘épargne logement’) from Wüstenrot, in partnership with AXA, you can obtain a mortgage loan at a favorable rate for the term of the specified loan period.
Whether you are Luxembourg resident or a frontier worker / cross-border worker in Luxembourg and you opt for tax assimilation, the annual payments into a home savings plan are deductible from your axable income up to an amount of 672 EUR per year and per person in the household. In order to be able to take advantage of the available tax deductions, the contract has to run for a period of 10 years.
Contact your AXA Luxembourg Kirchberg insurance agency, EasyNext, if you wish to receive more information about the Wüstenrot (‘épargne logement’) home savings plan.
- Personal contributions to a complementary pension plan (2nd pillar)
Personal contributions to an employer’s complementary pension plan are deductible for an amount of 1.200 EUR per year.
If you are an employer and you wish to know what the benefits are of setting up a complementary pension plan, do not hesitate to contact your AXA Luxembourg Kirchberg insurance agency: EasyNext.