“The first piece of advice” that Laura Foulds, managing director of Analie Tax & Consulting, gives expats in Luxembourg “is that when they’re filing their tax returns to remember to declare their global income.” Expats often omit rental income in another country, for example, because they’ve already paid taxes on it there. But Luxembourg’s tax office calculates rates “on global income” and then applies the rate to the “income that’s taxable in Luxembourg.”

That sometimes can work in an expat’s favour. Losses from abroad can offset local revenue, which “will reduce your rate” here.

With the automatic exchange of tax information between jurisdictions, Luxembourg Inland Revenue (ACD) will eventually notice that some income is missing from local tax filings. Theoretically that could result in a penalty, but Luxembourg agents typically allow taxpayers to simply resubmit tax declarations with corrected numbers. Obviously, there is a risk that back taxes would then be due.

Married couples’ withholding insufficient

“My number two tip would be, when you have two working spouses, to understand that the withholding is not your final tax bill.” A standard rate of 15% is withheld on payslips, but “in most cases” that is not nearly enough. “So you can easily end up with significant taxes due at the end of the year. That’s okay, if you’re expecting it, but a lot of the newcomers don’t expect it and then they get hit with these big bills,” Foulds said. “People, especially newcomers, are shocked when they get their first tax assessment.”

Get local advice

Thirdly, newcomers should “take some tax advice when you arrive, because the rules are going to be different [here in Luxembourg] and the country where you came from. Some understanding of what you have to do from day one saves a lot of problems later on.” Sometimes just a one-hour consultation with a tax professional is enough.

For example, book “a one-hour consultation with a tax professional, even if they don’t need more than that, to at least understand specifics of your country. And that applies for people leaving Luxembourg and going somewhere else as well. They should go and take some local tax advice, because it changes in every single country.”

Review tax assessments

Foulds also advises taxpayers to “check your tax assessments carefully.... just in case they don’t align with what you filed in your tax return. Maybe the tax office has changed something or sometimes they make an error. But you only have a very short window to appeal it and have it changed. So, you need to act promptly on the tax assessments.”

Indexed tax scales

Good to know: Luxembourg’s tax brackets were adjusted upwards in 2024 and will be readjusted again in 2025, to keep pace with inflation and rising salaries.