Whether you’re single, married or in a civil partnership, you can reduce your tax bill in Luxembourg just by knowing what you can and can’t deduct. The myLIFE team takes a look at the main tax deductions possible for resident and cross-border taxpayers.
The mere thought of taxes often strikes fear into the hearts of most people. Even more so when a reform has far-reaching effects on taxpayers’ habits, in particular those of non-resident married couples. However, there are also times when dealing with taxes can actually be a good thing.
All taxpayers can reduce the amount of taxes they pay by declaring certain costs, charges and extraordinary expenses, including in particular tax deductible products. To do this, you need to meet one of two requirements: you must live and file a tax return in Luxembourg, or be equivalent to a resident for tax purposes.
Someone who is not tax resident in Luxembourg may, under certain conditions, be able to benefit from the same tax advantages and constraints as a resident taxpayer.
The criteria to be treated as equivalent to a resident are as follows:
These conditions have been extended for the 2019 tax return (2018 income) onwards. If a non-resident receives net income that does not come from Luxembourg but is less than €13,000, they can still request to be treated as equivalent to a resident.
Be careful though – by choosing to be treated as equivalent to a resident for tax purposes, cross-border taxpayers must declare all of a couple’s income. If one of them does not work in Luxembourg, their income will not be taxed in Luxembourg and will only be used to determine the tax rate on Luxembourg income for the tax household.
Interest on loans, contributions, etc. There are a number of ways of paying less tax, by stating all expenses that may be deducted in your tax return. Among other things, these expenses include contributions, insurance premiums, interest on loans, maintenance payments, pensions, contributions to home savings plans, top-up pension schemes, donations and gifts, and charges or allowances for children who are not part of the household. These various costs and charges must be entered on pages 13 to 18 of the tax return on 2018 income. This is explained in more detail in the article “Tax returns: exceptional expenses and extraordinary costs”.
Investing in property can also be a way of reducing your tax bill.
Property loans and rental income. Investing in property can also be a way of reducing your tax bill. Taxpayers can deduct interest on property loans, whether in relation to a primary residence or a buy-to-let investment.
Number of years Deductible amount
For the first year and the next 5 years €2,000
For the subsequent 5 years €1,500
After 11 years €1,000
Source: Le Guide des impôts, 2018 edition
Don’t forget that the deadline for submitting your tax return in Luxembourg is 31 March for taxpayers required to complete a tax return or wishing to change their mode of taxation by opting for an individual taxation. For other taxpayers, the deadline is 31 December. After this date, taxpayers will no longer be able to benefit from any tax deductions.
If you want to calculate how much you could deduct from your taxes, check out our simulation.
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