Expatriate tax ebook - Luxembourg

Most tax planning involves the structuring of employment arrangements to take advantage of various tax concessions. Grant Thornton's Tax team can advise expatriates on these and related opportunities.

New Tax Regime for highly skilled expat employees
The regime is applicable as from 01/01/2011 to temporary recruitments from out of Luxembourg or secondments of expats from a foreign company (part of an international group) to a local company of the same group.

The regime is subject to several conditions amongst which:

- The employee must exercise activities with significant economical added value, be tax resident, not domiciled nor subject to Luxembourg tax on professional income in the 5 preceding years, be highly qualified (relevant diploma or have at least 5 years relevant experience or seniority in the group).

- The employer, if established for more than 10 years, must employ (or commit to employ in the medium term) at least 20 full time people with max 10% of the full-time staff benefitting from the regime.

- The "highly qualified” employment must be the principal activity of the employee, the fixed remuneration (before any benefits) is at least the maximum ceiling for social contributions (see “social security” before).

Expenses covered by the tax relief (= not considered as an income) are moving costs, furnishing costs in Luxembourg, housing expenses (under conditions), tuition fees, travel expenses in case of special events (birth, wedding, death of relatives), one home leave trip per year, tax equalization costs up to 30% of the annual remuneration with a max of € 50,000 (increased to € 80,000 if expat shares a house with spouse or partner), and a monthly lump sum allowance covering cost of living allowance up to 8% of the monthly fixed remuneration with a max of € 1,500 (or double to 16% or € 3,000 if spouse/partner has no professional activity).

Duration of the regime cannot exceed the 31st December of the 5th anniversary date of the employee’s arrival in Luxembourg.

Application: Written request to introduce to the tax office within two months of the start of employment.

 Information about Luxembourg:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities