Being a Taxpayer in Luxembourg Without Living There: In What Cases Is It Possible?
Not residing in Luxembourg does not automatically exclude someone from being a Luxembourg taxpayer. Indeed, any person receiving income from a Luxembourg source may be subject to tax in the Grand Duchy as a non-resident taxpayer.
Distinction Between Resident and Non-Resident Taxpayers
- A resident taxpayer is a person who has their tax residence in Luxembourg. As such, they are taxed on their worldwide income, regardless of its origin.
- A non-resident taxpayer, on the other hand, is someone who is fiscally resident abroad but receives certain income from Luxembourg sources. They are then only taxable on that income earned in Luxembourg.
Conditions for Assimilation for Non-Residents
An individual is considered a non-resident taxpayer if they receive, for example:
- A resident taxpayer is a person who has their tax residence in Luxembourg. As such, they are taxed on their worldwide income, regardless of its origin.
- A non-resident taxpayer, on the other hand, is someone who is fiscally resident abroad but receives certain income from Luxembourg sources. They are then only taxable on that income earned in Luxembourg.
In these situations, Luxembourg taxation applies only to income from Luxembourg sources.
Assimilation to a Resident Taxpayer: A Beneficial Tax Mechanism
The Luxembourg tax system allows, under certain conditions, a non-resident taxpayer to opt for the status of assimilated resident. This status grants access to the same deductions and tax benefits as those available to residents. The conditions to be met are as follows:
- 1. At least 90% of the household’s worldwide income must be taxable in Luxembourg, or the amount of net income not taxable in Luxembourg must not exceed €13,000 per year. * It should be noted that when income is exempt from tax in Luxembourg under a double taxation treaty (e.g., telework days in the country of residence), it is still included in the 90% calculation, up to a limit of 50 days per year.
- Special case for taxpayers residing in Belgium: under Article 24 § 4a of the tax treaty between Luxembourg and Belgium, a Belgian taxpayer can be assimilated to a Luxembourg resident if more than 50% of the household’s professional income is taxable in Luxembourg.
Advantages of Assimilation
Assimilation allows the non-resident taxpayer to:
- access a more favorable tax class (notably class 2 for married couples);
- benefit from specific tax deductions (loan interest, extraordinary expenses, child-related costs, etc.);
- and, more generally, enjoy tax treatment equivalent to that of a resident.
Conclusion
The Luxembourg tax system includes specific mechanisms allowing non-residents to contribute fairly to taxation while offering them the possibility of favorable treatment under certain conditions. Assessing the relevance of opting for assimilation requires a thorough analysis of the taxpayer’s family and financial situation. For any tax procedure or simulation, it is recommended to consult a professional or a specialized platform such as Chronotax, which supports you in optimizing your tax return.