Tax system in Luxembourg
Luxembourg taxes residents on worldwide income and non-residents on Luxembourg-source income. Personal income tax is progressive, with a 42% top bracket and a solidarity surtax that can take the top effective rate to 45.78%.
Luxembourg does not levy a general personal net wealth tax or a broad inheritance tax for close family members, but it does apply 15% dividend withholding tax, 17% VAT, payroll social security contributions, and company net wealth tax for opaque companies.
{ "2026 matters for planning": "Luxembourg has implemented Pillar Two filing, a new start-up investment tax credit, and a revised carried interest regime, while social and payroll costs continue to matter for employees and founders." }
Tax rates at a glance
- Income tax
- 0% - 45.78%Progressive
- Wealth tax
- 0% personal
- Inheritance tax
- 0% to 15%+
- Capital gains tax
- 0% / ordinary rates
- Corporate tax
- 23.87%
- Dividend tax
- 15%
- VAT
- 17%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersInvestorsExpatsHolding companiesHigh earners
Watch out for
- Luxembourg is not a zero-tax country. The headline personal rate is high, and payroll social security, VAT, and dividend withholding still matter.
- Company groups may face Pillar Two registration and filing from 2026 if they are in scope of the EUR 750 million revenue threshold.
- Property and inheritance rules depend heavily on family relationship, residence, and asset location, so the same transfer can have very different tax outcomes.
Frequently asked questions
Is Luxembourg a low-tax country?
Not for salary income. Luxembourg has progressive personal income tax up to a 42% top bracket plus a solidarity surtax, although it does not levy a general personal wealth tax.
Does Luxembourg have VAT?
Yes. Luxembourg VAT is 17% at the standard rate, with reduced rates for selected goods, services, and housing work.
Do foreign investors pay Luxembourg tax?
It depends on the income type and residence facts. Luxembourg-source dividends, salary, business profits, and certain capital gains can be taxed, while many treaty and exemption rules affect the final result.