In Luxembourg nowadays there is a high demand for highly skilled workers who specialize in specific sectors and can offer extraordinary knowledge. The goal of the Luxembourgish government is to attract more qualified employees globally, but also more companies and investors, and that is why the Luxembourg impatriate tax regime was introduced and implemented, and is being currently improved.
In July 2024, Finance Minister Gilles Roth, presented a new tax package called ‘Relief Package. Unity. Future. For Everyone’. (https://www.lexgo.lu/en/news-and-articles/13637-new-tax-package-to-strengthen-luxembourg-s-attractiveness) Part of this package was a new draft law in order to facilitate the integration of well-qualified foreigners who want to relocate for a job in Luxembourg. There have been significant amendments to the current income tax regime, benefiting newly arrived working expats in Luxembourg. This is part of a complete reformation of the tax system with a long term objective.
What is the Luxembourg impatriate tax regime and what does Impatriation mean?
The Luxembourg impatriate tax regime is a tax regulation, specifically developed and implemented for impatriate employees, which allows employers to exempt tax of certain parts of remuneration in connection to impatriation. Impatriation means the facilitation of employees hired while residing abroad to come work to a new country, in this case, Luxembourg. Impatriate employees are also considered expats of course, with the difference that they relocate precisely because they accept a job offer in their new country, while residents in their previous one. I can also mean that they are hired by a Luxembourgish company or legal entity, while still residing abroad.
Last but not least, to mention here the key point of the latest regime amendments: the period of duration of the Luxembourg impatriate tax regime was increased from 5 years to 8. But other than that, there were more, crucial, suggested changes in the regime, which will make the employees’ and employers’ tax life in Luxembourg, much easier.
As Deloitte Luxembourg is reporting, those new proposals include higher profit-sharing bonus, increased limit based on gross annual remuneration, new simplified calculations of exemption and more adjustments regarding individual tax rates and credits.
Here are some tables comparing the current with the new regime:
| Current Regime | New Regime | |
| Cap on employer side:% of positive result of previous operating year | 5% | 7.5% |
| Cap on employee side:% of gross annual remuneration | 25% | 30% |
| Impatriate regime | |
| Relocation and repatriation expenses, home leave allowances, housing allowances, tax equalization payments: full exemption, capped at the lesser of 30% of inpatriate’s annual remuneration or EUR 30,000 (EUR 50,000 if sharing household with spouse or partner), conditional on maintaining the house in the country of origin and having proof of expenses | 50% exemption of gross annual pay, up to EUR 400,000 |
| School fees: full exemption | |
| Impatriate premium: 50% exemption, capped at 30% of inpatriate’s annual remuneration |
| Tax rate (%) | Taxable income (EUR) | Taxable income (EUR) |
| 0 | 0 – 12,438* | 0 – 13,230* |
| 8-39 | 12,438 – 110,403 | 13,230 – 117,450 |
| 40 | 110,403 – 165,600 | 117,450 – 176,160 |
| 41 | 165,600 – 220,788 | 176,160 – 234,870 |
| 42 | Over 220,788 | Over 234,870 |
Key features and benefits:
- Travel expenses including relocation and moving expense, potential annual transport to / from home country of the employee, family related transport, final return to home country if needed
- Housing expenses such as rent, utility bills, furnishing and all related housing taxes
- Tax equalisation fees: Coverage of differential taxes between origin and host country
- School fees covered for the employee’s and/or their partner’s children, in primary and secondary education
- Impatriation bonus: A flat-rate bonus paid by the employer to match the cost-of-living difference between origin & host country
Who is eligible for the impatriate tax regime? Conditions for employees & employers in a nutshell:
- Tax resident in Luxembourg
- More than 150km from Luxembourgish borders during the 5 years before arrival in Luxembourg
- No declaration of professional income tax in Luxembourg for 5 years before arrival
- Main professional occupation relevant to the tax regime for impatriate employees
- Fixed annual gross income of more than 75000 euros
- Specialization in a specific, relevant field
- Recruited by a Luxembourg based company or an EU based company which carries out business activities in Luxembourg
How to apply for the impatriate tax in Luxembourg?
In order to apply for the Luxembourg impatriate tax regime you would need to have approval by the local tax authoritiries, but it is the employer’s main responsibility to run background checks and make sure that the newly hired employee falls under the impatriate category and he/she is eligible for joining this regime, mainly because usually those tax exemptions appear at the employee’s payslip as deductions.
Necessary application requirements
more might be requested depending on specific cases
- CV with clarified specialization
- Proof of tax residency 5 years before signing contract
- No income taxes paid in Luxembourg 5 years before arrival
- Employment contract
- Invoices of all related expenses
- Signed apartment/house lease agreement
- Proof of maintaining residency in the country of origin
Requirements for companies:
- The company must be based in Luxembourg, with a registered Luxembourgish address, even if only a virtual office and not a physical one.
- The company should demonstrate an international purpose of its activities.
- The recruiting should aim to attract specialized high-qualified personnel impossible to find in Luxembourg.
- Only 30% of the company's full-time workforce can be part of the Impatriate Tax Regime.
For more information on how to apply for the impatriate tax regime, please contact Luxembourg Inland Revenue (ACD)
Address: 33, rue de Gasperich L-5826 Hesperange Luxembourg
Website: https://impotsdirects.public.lu/fr/profil/organigramme.html
The future of the Luxembourg impatriate tax regime
This draft law was proposed for implementation in order to improve Luxembourg's attractiveness as a workplace and promote the creation of high-skilled positions. There will be some expected tax revenue loss due to these new measures, but it shall be balanced later on as calculated by governmental, financial experts. Those measures are still subject to the approval of Parliament and the Council of State, and are expected to be in effect within 2025.
