Declaring interest received
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Beneficiaries of interest payments must, in principle, declare them to the tax authorities of their country of residence. In Luxembourg, non-resident taxpayers who request to be treated as a resident for tax purposes must also declare their interest payments in Luxembourg.
Certain types of interest paid to Luxembourg resident taxpayers by a Luxembourg bank are automatically subject to a Luxembourg withholding tax of 20 %.
Other interest payments to Luxembourg resident taxpayers may be subject, upon request, to a 20 % withholding tax. The bank or paying agent must be foreign, not Luxembourgish.
The 20 % withholding tax is neither refundable nor creditable against other tax liabilities in Luxembourg.
Who is concerned
This applies to the following:
- resident taxpayers receiving interest payments;
- non-resident taxpayers who receive interest payments and who opt for tax treatment equivalent to that of a resident.
Prerequisites
In order to opt for the 20 % withholding, taxpayers must:
- be Luxembourg residents; and
- receive foreign interest, i.e. interest paid by paying agents established in a Member State of the European Union or the European Economic Area (EEA - Iceland, Liechtenstein, Norway).
Non-resident taxpayers treated as resident taxpayers cannot opt for this 20 % withholding.
Deadlines
Income must be declared no later than 31 December following the year in which it is received. Past this deadline, the beneficiary can no longer opt for withholding. This choice is irrevocable for the year in question.
How to proceed
Interest paid by a paying agent established in Luxembourg
Beneficiaries must declare interest received to the tax authorities in their country of residence. In Luxembourg they must, in principle, be reported in the income tax return (form 100), in the category net income from movable assets.
Any interest paid to a Luxembourg resident and paid by a bank, paying agent, fiduciary, credit institute, distributor or specialised service provider established in Luxembourg is automatically subject to the 20 % withholding tax provided the interest is generated by:
- current accounts and sight deposit accounts, if the annual interest rate is higher than 0.75 %;
- sight savings accounts and term deposits if the amount of interest exceeds EUR 250 per taxpayer and paying agent;
- bonds.
Resident Luxembourg taxpayers who receive interest subject to 20 % withholding tax levied directly by a paying agent established in Luxembourg no longer have to declare the interest in their tax return.
The following are not concerned by the withholding tax:
- non-resident beneficiaries or non-resident beneficiaries treated as residents for tax purposes;
- legal persons who receive interest payments;
- natural persons who receive interest on the profits from a commercial enterprise, an agricultural or forestry business, or on the profits from a self-employed activity;
- interest from investment funds.
Interest payments by a paying agent established abroad
Beneficiaries must declare interest received to the tax authorities in their country of residence.
Interest paid by a paying agent established abroad is not subject to the Luxembourg withholding tax of 20 %.
Luxembourg resident taxpayers or non-residents treated as resident for tax purposes must indicate the interest received in the income tax return (form 100), in the category net income from movable assets. This income is subject to standard progressive rates (between 0 % and 42,80 %, or even 43,60 %), and subject to the long-term care insurance contribution.
Resident taxpayers can opt for a 20 % withholding by declaring all of their interest payments received by using form 931. The paying agent must be established in a Member State of the European Union or the European Economic Area (EEA - Iceland, Liechtenstein, Norway). Non-resident taxpayers treated as a resident taxpayer cannot opt for this 20 % withholding.
A minimum lump sum of EUR 25 can be deducted as expenses for the acquisition of income (frais d'obtention - FO) in the tax return. If the actual amount of theses expenses is higher than the lump sum, it is necessary to indicate the actual amount.
It should be noted that an exemption of EUR 1,500 applies to all income from movable assets received during the year (EUR 3,000 in the case of joint taxation).
Foreign withholding tax, non-Luxembourgish
In accordance with a bilateral convention, a foreign, non-Luxembourg withholding from a foreign interest payment can be charged against the rest of the tax payable in the country of residence of the beneficiary.
Supporting documents
The taxpayer is requested to attach all documents that indicate the amount of interest received.
The Luxembourg Inland Revenue reserves the right to request additional supporting documents as part of the process of verifying any information, statements, applications, declarations, claims or appeals submitted to its offices.
Online services and forms
Who to contact
-
Luxembourg Inland Revenue (ACD)
- Address:
- 33, rue de Gasperich L-5826 Hesperange Luxembourg
Please click on the link above to find the competent department.
Related procedures and links
Procedures
Links
Further information
Legal references
-
Loi modifiée du 4 décembre 1967
concernant l'impôt sur le revenu
-
Loi modifiée du 23 décembre 2005
portant 1. introduction d'une retenue à la source libératoire sur certains intérêts produits par l'épargne mobilière; 2. abrogation de l'impôt sur la fortune dans le chef des personnes physiques; 3. modification de certaines dispositions de la loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu
- Circulaires RIUE
-
Circulaire LIR n°97/1 du 4 décembre 2002
Déduction des frais d’obtention en relation avec des revenus de capitaux mobiliers
