Employer Tax Contributions

Tax Type	Rate	Base
Pension Insurance	8%	Gross Salary (capped monthly at EUR 12,854.64)
Health Insurance	2.80% - 3.05%	Gross Salary (capped monthly at EUR 12,854.64)
Accident Insurance	0.595% - 1.13% (variable)	Gross Salary (capped monthly at EUR 12,854.64)
Mutualité des Employeurs	0.01% - 2.98% (variable)	Employee's Remuneration

Filing & Compliance

• Register with the Joint Social Security Centre (CCSS) within 8 days of hiring the first employee.
• Withhold income tax from employee salaries (PAYE system) and remit monthly by the 25th of the following month.
• Declare gross wages and paid hours to the CCSS monthly, returning pre-printed payrolls within 10 days of receipt.

In Luxembourg, employee tax deductions encompass various areas, including employment expenses, social security contributions, pension contributions, and specific allowances.

Employment Expenses

• A standard deduction of €540 applies for job-related expenses. This is doubled to €1,080 for married couples or registered partners where both are employed.
• Actual expenses exceeding the standard deduction can be claimed, including costs for tools or specific work clothes.
• Commuting expenses are deductible up to a yearly maximum of €2,574.

Social Security and Pension Contributions

• Both Luxembourgish and foreign (covered by a treaty) social security contributions are deductible.
• Contributions to qualifying employer-sponsored pension schemes are deductible up to €1,200 annually.

Impatriate Regime

• A new regime effective from 2025 provides a 50% tax exemption on gross annual remuneration up to €400,000 for eligible impatriates. This translates to a maximum exemption of €200,000 per year. This regime is applicable for the year of arrival and the eight subsequent years. The employee must not have been a Luxembourg tax resident or lived within 150km of its border for the five years preceding relocation. They also need a minimum annual salary of €75,000.

Profit-Sharing Bonus Regime

• The profit-sharing bonus scheme allows for a 50% exemption on bonuses linked to employer profits, up to 30% of the employee's annual gross salary and 7.5% of the previous year's profits.

Bonus for Young Employees

• Employees under 30 in their first permanent contract in Luxembourg with a gross annual salary under €100,000 can benefit from a 75% tax exemption on bonuses between €2,500 and €5,000.

Other Deductions and Allowances

• An allowance for extraordinary expenses for children not part of the household is available (€5,424 per child annually).
• Interest on property loans, including bridging loans, for acquiring existing homes is deductible. The deduction is full in the first year based on rental value. Specific caps apply for subsequent years (€4,000 in the second year, €3,000 annually for the next five years, then €2,000).

General Tax Information for 2025

• Households with a gross annual income up to €52,400 are exempt from taxes for the 2025 tax year. This applies to all tax classes.
• Actively managed Exchange Traded Funds (ETFs) qualifying as UCITS are exempt from subscription tax as of 2025.
• Taxpayers can opt out of the participation exemption on dividends, liquidation proceeds, and capital gains, as well as the 50% dividend exemption for qualifying shareholdings, on an annual basis.

It's important to remember that this information pertains to the 2025 tax year and might be subject to future changes. Always consult official sources or a tax advisor for the latest regulations.