Tax
The EU's lowest standard VAT, at 17%, alongside progressive income tax
Personal income tax is progressive across many bands and depends on a tax-class system reflecting family situation. Corporate profits face corporate income tax plus a municipal business tax, and standard VAT is 17% — the lowest headline rate in the European Union.
Key rules
- Income tax is progressive and applied through tax classes (1, 1a, 2) reflecting marital and family status.
- Companies pay corporate income tax plus a municipal business tax and a solidarity surcharge.
- Standard VAT is 17%, with reduced rates of 8% and 3% and an intermediate 14%.
- A net wealth tax applies to companies, with rates adjusted after a 2023 Constitutional Court ruling.
Governing law
- Income Tax Law (Loi concernant l'impôt sur le revenu, LIR)Personal and corporate income tax
- VAT Law (Loi TVA)17% standard rate
Penalties and consequences
- Surcharges and interest for late filing or payment
- Penalties for tax fraud
In practice
The tax-class system means marital status materially changes an individual's liability, and cross-border workers have specific rules. The low VAT rate is a long-standing feature of the Luxembourg economy.