Despite the grand duchy’s international reputation for corporate tax friendliness, that is not necessarily the case for individuals. “In Luxembourg, the taxes are quite high if we compare with other countries... particularly when you are single,” observes Jean-Philippe Franssen, partner, payroll and personal tax at Grant Thornton Luxembourg.
There is an “expatriate tax regime”, which Franssen calls “complex” to set up and involves quite a bit of preparation with the expat and employer before relocation. It also has its limits: “it’s interesting, but not too interesting” and “it’s for a determinate period of only eight years.”
Aside from the expat regime, Luxembourg’s tax rules apply uniformly across nationalities. “Citizenship doesn’t play a role,” according to Nicole Fletcher, senior manager, payroll and personal tax at the same firm. The same goes for married couples with different passports: it won’t impact tax filings.
What could complicate matters is income from multiple countries, notes Fletcher. For example, rental income from an expat’s home country could limit tax deductions here. And in general, expats shouldn’t claim deductions in their home country if they’re filing as a Luxembourg resident. Speak with a tax advisor to be sure.