LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
Employees must contribute to Luxembourg social security, which covers pension, health, accident insur - ance and dependency insurance. Approximate employee contributions (on gross salary up to a cap for some items) are: • pension insurance: ~8%; • health insurance: ~3.05%; and • dependency insurance ( assurance dépendance ): ~1.4% (on adjusted base). Total employee contributions amount to approximate - ly 12%–13% of the gross salary. These contributions are withheld directly by the employer. Employers must also pay additional contributions on top of gross salary. Approximate employer contribu- tions are: • pension insurance: ~8%; • health insurance: ~3.05%; • accident insurance: ~0.5%–1.5% (rate depends on sector risk); and • health at work/mutual insurance scheme: ~1%. Total employer contributions amount to approximately 12%–15% of gross salary. These contributions can vary slightly depending on the employee’s status and the employer’s risk category. Social security contributions are capped to a gross remuneration of EUR13,518.68. This cap is revised regularly based on minimal wage indices. Employers must: • withhold income tax at source; • withhold employee social contributions; • pay both employee and employer social contribu - tions to the Centre Commun de la Sécurité Sociale (CCSS); and • file monthly/annual payroll reports. 5.2 Taxes Applicable to Businesses To be subject to taxation in Luxembourg, a company must be considered as tax resident in Luxembourg or receive certain Luxembourg sourced-income. In the
first scenario, the company is taxable on its world - wide income; in the second one, only the Luxembourg sourced-income is taxable. An entity is considered Luxembourg-resident if: • it is incorporated in Luxembourg; or • its place of effective management (central adminis - tration) is located in Luxembourg. Effective man - agement includes where strategic decisions are made, board meetings held, and senior manage - ment operates. Corporate Income Tax (CIT) and Municipal Business Tax (MBT) The ordinary CIT rate applicable to resident and non- resident collective entities in 2026 is: • 14% for taxable income not exceeding EUR175,000; • EUR24,500 plus 30% of the income exceed - ing EUR175,000 for taxable income between EUR175,000 and EUR200,001; and • 16% for taxable income exceeding EUR200,000. CIT applies only to corporate entities listed in Article 159 of the Income Tax Law and does not apply to tax-transparent entities (eg, general or limited partner - ships or European economic interest groupings unless they are subject to reverse hybrid rules). To CIT rate, the following must be added. • Solidarity surcharge: 7% of CIT for the year 2026 – bringing the aggregate CIT rate to 17.12% (16% rate + (7% x 16%)) for the year 2026 for col - lective entities whose taxable income is above EUR200,000. • Municipal Business Tax (MBT): rate varies by municipality, approximately 6.75% in Luxembourg City. Net Wealth Tax (NWT) NWT applies to resident companies (subject to exemptions for certain holding companies). NWT is a state tax levied on the net wealth of companies, charged on their worldwide so-called “unitary value” (generally equal to the net asset value of the company
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