Luxembourg, a thriving financial hub in the heart of Europe, recognizes the importance of attracting and retaining skilled professionals and digital nomads. To this end, the country offers a range of tax incentives and breaks specifically tailored to these individuals.
Eligibility Criteria
To qualify as an expatriate for tax purposes in Luxembourg, individuals must meet the following criteria:
- Be a non-resident of Luxembourg for at least five consecutive years prior to taking up residence in the country.
- Have a valid work permit or be self-employed in Luxembourg.
- Earn at least 50% of their income from Luxembourg sources.
Digital nomads, on the other hand, are not explicitly defined in Luxembourg's tax laws. However, they may qualify for certain tax breaks if they meet the general eligibility criteria for expatriates and if their income is derived from remote work performed for non-Luxembourgish companies.
Types of Tax Breaks
Expatriates and digital nomads in Luxembourg can benefit from the following tax breaks:
- Impatriate Regime: This regime provides a tax exemption on 50% of employment income for a period of five years. To qualify, individuals must be recruited from abroad and have a high level of expertise or specialization.
- Highly Qualified Professionals Regime: This regime offers a reduced tax rate of 20% on employment income for a period of five years. To qualify, individuals must have a master's degree or equivalent qualification and earn at least 100,000 euros per year.
- Foreign Income Exemption: Expatriates and digital nomads can exempt foreign-sourced income from Luxembourg taxation if it is not remitted to Luxembourg. This exemption applies to both employment income and investment income.
Application Process
To apply for these tax breaks, expatriates and digital nomads must submit a request to the Luxembourg Inland Revenue (ACD). The application should include documentation proving eligibility, such as a work permit, employment contract, or proof of foreign income.
Legal Framework
The tax incentives for expatriates and digital nomads in Luxembourg are established through the following legal instruments:
- Income Tax Law (Article 153): Outlines the Impatriate Regime and the Highly Qualified Professionals Regime.
- Grand-Ducal Regulation of 18 December 2017: Specifies the conditions for the Foreign Income Exemption.
These tax policies aim to attract and retain skilled professionals and digital nomads to Luxembourg. By offering tax incentives, the government seeks to foster economic growth, innovation, and international competitiveness.
If you need any other informational tax guides for other countries, feel free to browse our other articles below:
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