Opting as a non-resident to be treated as a resident for tax purposes
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Non-resident taxpayers who earn most of their income in Luxembourg can opt to be treated as resident taxpayers.
Provided they meet the conditions to be treated as resident taxpayers, they may, on request, benefit from the same deductions, allowances and credits as resident taxpayers.
Who is concerned
This applies to all non-resident taxpayers who have their tax residence or usual place of residence abroad while having a certain income (professional and/or from property) that is taxable in Luxembourg.
This can be the case for:
- a cross-border commuter who travels back and forth between their home residence abroad and their place of work in Luxembourg; or
- an employee who has a place (pied-à-terre) in Luxembourg during the week and who returns home to their family abroad every weekend and holiday.
Prerequisites
The taxable income in Luxembourg must exceed a certain threshold of the non-resident's worldwide income (both domestic - from Luxembourg source - and foreign).
At least 90 % of the income must be taxable in Luxembourg.
The 90 % threshold can be calculated by reference to each of the partners' or spouses' individual situation.
Taxpayers residing in Belgium can claim to be treated as resident taxpayers if either 50 % of the professional income of the household is taxable in Luxembourg or if they fulfil the 90 %-condition.
Since the 2018 tax year, non-resident taxpayers whose net cumulated income not subject to Luxembourg income tax is below EUR 13,000 can also opt to be treated as resident taxpayers.
For the purpose of calculating the 90 % threshold, the income from a salaried activity taxed in another state than Luxembourg on the grounds of a double tax treaty is to be treated as domestic income taxable in Luxembourg but only up to a maximum corresponding to 50 working days.
Deadlines
The income tax return (model 100) must be submitted to the relevant tax office by 31 December of the year following the tax year, respecting the specific deadlines set out in the notices issued by the various departments of the Luxembourg Inland Revenue (Administration des Contributions Directes - ACD).
How to proceed
Application to be treated as a resident for tax purposes
Non-resident taxpayers can apply to be treated as a resident taxpayer using the Luxembourg income tax return (form 100).
Since the 2018 tax year, non-resident married taxpayers, employees or pensioners, can also opt to be treated as resident taxpayers and have a tax rate stated on their tax card. Taxpayers who make this choice are also required to file a tax return.
The application for registration of the rate on the tax card can be submitted online without authentication through LuxTrust or eID (Application for individualisation / RTS rate), or by sending a specific request to the relevant tax department.
Consequences of being treated as a resident for tax purposes
Non-resident taxpayers who opt to be treated as a resident taxpayer are required to declare all of their worldwide income (foreign and domestic).
Foreign income is, in principle, excluded from the tax base in Luxembourg, in accordance with double taxation treaties. However, it is added to the taxable income in Luxembourg for the purpose of determining the tax rate.
It should be noted that foreign income (positive or negative) is determined in accordance with Luxembourg tax provisions.
Tax deductions
By opting to be treated as a resident taxpayer, the non-resident taxpayer can claim the same tax deductions, allowances and tax credits as resident taxpayers (see 'Income tax deductible expenses').
A single taxpayer with a child in their household who benefits from a tax reduction for children can also claim the single-parent tax credit (crédit d'impôt monoparental - CIM).
Calculation method
When a non-resident is treated as a resident for tax purposes, the Luxembourg Inland Revenue makes 2 calculations:
- first calculation: determination of the tax rate: the tax authorities determine the rate by adding the Luxembourg and foreign income together and then subtracting deductible expenses;
- second calculation: the administration then applies the previously calculated rate to the taxable domestic income in Luxembourg only.
In practice, opting to be treated as a resident for tax purposes will be worthwhile only if the non-resident taxpayer or their spouse or partner (having opted for joint taxation) has no or only very little income outside of Luxembourg during the tax year in question.
The taxation can be simulated using an online service.
Practical examples
Example 1
Mr. and Mrs. XY are married and reside in Germany. They have the following income:
- Mr. X works in Luxembourg and has EUR 40,000 of net wage income (gross salary - exempt salary - business expenses - travel expenses = EUR 40,000);
- Mr. X also works in Germany and receives EUR 12,500 in net income from a salaried activity;
- Mrs. Y does not exercise any professional activity;
- spouses X and Y have no other income.
Determining the percentage of taxable income in Luxembourg in relation the worldwide income:
Total non-exempt net income x 100 Total of non-exempt and exempt income |
= |
40,000 x 100 40,000 + 12,500 |
= 76.19 % |
Mr X cannot opt to be treated as a resident taxpayer since the taxable income in Luxembourg represents less than 90 % his worldwide income.
Since the 2018 tax year, Mr. X could opt to be treated as a resident taxpayer because the income which is not taxable in Luxembourg is less than EUR 13,000.
Example 2
Mr. and Mrs. WZ are married without children and they reside in France in a residence that they own. The household's income is as follows:
- Mr. W receives a net income from a salaried activity in Luxembourg of EUR 40,000;
- Mrs. Z receives an income of EUR 18,000 from a self-employed activity in France that is tax-exempt in Luxembourg.
In this example, the spouses' only taxable domestic income in Luxembourg is Mr. W's salary in Luxembourg (EUR 40,000).
Mr. W is taxable in Luxembourg for 100% on his worldwide income:
Total non-exempt net income x 100 Total non-exempt and exempt income |
= |
40,000 x 100 40,000 |
= 100 % |
He can therefore apply to be treated as a resident taxpayer.
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
-
Circulaire LIR n°157ter/1 du 27 juin 2008
Modifications en matière d'imposition des contribuables non résidents
-
Loi du 26 juillet 2010
modifiant les articles 157, 157bis et 157ter de la loi modifiée du 4 décembre 1967 concernant l'impôt sur le revenu
