How income tax works in Luxembourg
Luxembourg taxes residents on worldwide income and non-residents on Luxembourg-source income. Tax liability depends on tax class, with class 1, 1a, and 2 still used in the 2026 system.
The 2025 tax scale applies in 2026 and runs from 0% up to 42% on taxable income above EUR 234,870. A solidarity surtax of 7% of tax due applies generally, rising to 9% for very high earners.
Even with no special local tax on certain income, payroll costs still matter. Employers with Luxembourg staff must withhold social security contributions through the CCSS, and residents can also face dependency contributions on some investment and capital income.
Income tax brackets in Luxembourg
| Bracket | Rate | Notes |
|---|---|---|
| 0 to 13,230 | 0% | Entry band |
| 13,230 to 15,435 | 8% | Tax year 2025 scale used in 2026 |
| 15,435 to 17,640 | 9% | |
| 17,640 to 19,845 | 10% | |
| 19,845 to 22,050 | 11% | |
| 22,050 to 24,255 | 12% | |
| 24,255 to 26,550 | 14% | |
| 26,550 to 28,845 | 16% | |
| 28,845 to 31,140 | 18% | |
| 31,140 to 33,435 | 20% | |
| 33,435 to 35,730 | 22% | |
| 35,730 to 38,025 | 24% | |
| 38,025 to 40,320 | 26% | |
| 40,320 to 42,615 | 28% | |
| 42,615 to 44,910 | 30% | |
| 44,910 to 47,205 | 32% | |
| 47,205 to 49,500 | 34% | |
| 49,500 to 51,795 | 36% | |
| 51,795 to 54,090 | 38% | |
| 54,090 to 117,450 | 39% | |
| 117,450 to 176,160 | 40% | |
| 176,160 to 234,870 | 41% | |
| 234,870+ | 42% |
Tax rates at a glance
- Personal income tax
- 0% - 42%Progressive
- Top marginal rate with surtax
- 45.78%
- Solidarity surtax
- 7% / 9%
- Salary withholding
- Yes
- Foreign income
- Taxed for residents
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
ExpatsEmployeesContractorsHigh earnersCross-border workers
Watch out for
- Luxembourg residents are taxed on worldwide income, but treaty relief and exemption-with-progression rules can change the effective rate.
- Salary is not the only payroll cost. CCSS contributions are withheld by the employer, and the employee also faces dependency-style contributions on some income.
- The government has also introduced a 2026 start-up investment tax credit and updated tax measures, so founder and investor planning should be revisited.
Frequently asked questions
Do expats pay income tax in Luxembourg?
Yes, if they earn Luxembourg-source income and are tax resident or otherwise taxable under Luxembourg rules. The rate depends on tax class and income level.
Does Luxembourg tax foreign income?
Residents are taxed on worldwide income, with treaty relief and exemption-with-progression rules applying in many cases. Non-residents are generally taxed only on Luxembourg-source income.
Is Luxembourg payroll heavy?
It can be. Employers must withhold social security contributions, and total payroll cost depends on the employee, the ceiling, and the applicable branch rates.