Identifying and declaring a legal pension
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In Luxembourg, statutory pensions paid by a pension fund under a Luxembourg social security scheme are subject, in accordance with most of the agreements, to withholding tax in Luxembourg which is levied directly by the autonomous pension fund of Luxembourg on the basis of the information entered on the beneficiary's tax card or withholding tax card.
The purpose of the bilateral agreements is to eliminate legal double taxation of direct taxes, either by the exemption method or by the deduction method. There are currently more than 82 different bilateral agreements in force in Luxembourg.
Some pensioner beneficiaries are in the obligation to file a tax return. The others may request a adjustment of tax withholdings on pensions by annual adjustment.
The Luxembourg tax due for an annual income in Luxembourg below EUR 11,265 is zero.
Who is concerned
Anyone who:
- as a resident or non-resident, collects legal pensions paid by an independent retirement fund;
- as a resident or non-resident, files an income tax return or requests an adjustment of the tax withholding on their pensions through an annual adjustment as a resident or non- resident.
In particular, the spouses or partners taxed jointly can benefit, on request, of an extra-professional tax allowance of EUR 4,500 if they meet the following conditions:
- either of the spouses or partners makes a profit from a business, agricultural and forestry, or self-employment activity, or earns income from paid employment;
- the other spouse or partner had been collecting a pension or annuity for fewer than 36 months as of 1 January of the tax year.
How to proceed
Declaring the income from a legal pension through an income tax return
Resident or non-resident pensioners who file a tax return must declare the pensions paid by an independent retirement fund that they collected during the year on page 8 of the income tax return (form 100 – Section "Revenu net résultant de pensions ou rentes" - Net income from pensions or annuities).
The first 2 columns concern non-exempt income and the next 2 columns concern exempt income.
In application of the double taxation treaty between Luxembourg and Germany, retirement pensions paid by a social security institution are taxable in the country that pays these benefits.
In application of the double taxation treaty between Luxembourg and Belgium, and the treaty between Luxembourg and France, the retirement pensions paid by a social security institution are taxable in the country that was the source of the income.
In application of the double taxation treaty between Luxembourg and Portugal, the pensions paid by a Luxembourgish social security entity to a resident of Portugal are taxable in Luxembourg, except for the monthly amount of EUR 1,239.47 which is tax-exempt in Luxembourg.
A non-resident pensioner who receives a Luxembourg legal pension will, in principle, also have to declare the pension in their country of residence. Double taxation of direct taxes will be avoided either by the exemption method or the tax credit method.
For legal pensions from other countries, pensioners are advised to refer to the appropriate tax treaty to determine if this income is taxable in the beneficiary's country of residence, or in the country that was the source of the income.
Income paid by a Luxembourgish pension fund
In theory, income from pensions that are paid by a Luxembourgish independent retirement fund to a retiree, whether they are a resident or non-resident, is non-exempt income.
Based on the annual certificate of annuity/pension, tax withholdings and subsidised tax credits issued to them by their independent retirement fund, the retiree must report the following information in their tax return:
- the gross amount of the pension payments that are taxable in Luxembourg. This gross amount corresponds to the amount of the pension before the withholdings by the independent retirement fund;
- expenses for the acquisition of income (minimum fixed amount or actual expenses). The taxpayer is entitled to a minimum fixed amount of EUR 300 per year for all pensions or annuities received during the year (rows A, B and C combined). In the case of a joint filing, this allowance is granted to each spouse or partner who receives a pension or annuity;
- the amount of tax withheld at source by the independent retirement fund. This amount is indicated under point "E) Withheld tax" of the certificate of annuity/pension, tax withholdings and subsidised tax credits issued by the independent retirement fund;
By checking the appropriate box and indicating the date from which the pension or annuity is paid, spouses or partners who are jointly taxed may be entitled to an extra-professional allowance of EUR 4,500 upon request, if they satisfy the following conditions:
- either of the spouses or partners makes a profit from a business, agricultural and forestry, or self-employment activity, or earns income from paid employment;
- the other spouse or partner had been collecting a pension or annuity for fewer than 36 months as of 1 January of the tax year.
The pensioner must attached their certificate of annuity / pension, tax withholdings and subsidised tax credits to their income tax return.
For legal pensions from other countries, pensioners are advised to refer to the appropriate tax treaty to determine if this income is taxable in the beneficiary's country of residence, or in the country that was the source of the income.
Income paid by a foreign pension fund
In theory, income from pensions that are paid by a foreign independent retirement fund to a Luxembourgish resident in connection with a job they had done abroad is exempt income.
For legal pensions from a foreign pension fund, it is recommended to refer to the appropriate tax treaty to determine if this income is taxable in Luxembourg or in the country that was the source of the income.
In theory, income from pensions that are paid by a foreign independent retirement fund to a Luxembourgish resident or to a non-resident treated as a resident for tax purposes, in connection with the professional activity they had abroad, is exempt income.
Resident pensioners must declare the pensions paid by an independent retirement fund in their income tax return in the boxes for exempt income (revenus non exonérés) and/or for non-exempt income (revenus exonérés).
The pensioner must attach their foreign certificate of annuity/pension to their income tax return.
The Luxembourgish or foreign social security contributions paid to a legal social security scheme are in theory deductible.
Reporting the income from a legal pension through the annual adjustment method
Taxpayers who do not satisfy the conditions for filing an income tax return may, under certain conditions, submit a request for an adjustment of tax withholdings by way of the annual adjustment procedure in order to recover any surplus tax withheld at the source. The annual adjustment application form is identical for both employees and retirees.
A non-resident pensioner who collects a Luxembourg legal pension will generally have to declare the pension in their country of residence. Double taxation of direct taxes will be avoided either by the exemption method or the tax credit method.
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
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Loi modifiée du 4 décembre 1967
concernant l'impôt sur le revenu
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Loi modifiée du 28 juin 2002
1. adaptant le régime général et les régimes spéciaux de pension; 2. portant création d'un forfait d'éducation; 3. modifiant la loi modifiée du 29 avril 1999 portant création d'un droit à un revenu minimum garanti
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Circulaire LIR n°96/3 du 25 septembre 2003
Traitement fiscal du forfait d’éducation créé par la loi du 28 juin 2002 – 1. adap- tant le régime général et les régimes spéciaux de pension; 2. portant création d’un forfait d’éducation; 3. modifiant la loi modifiée du 29 avril 1999 portant création d’un droit à un revenu minimum garanti (Mém. A 2002, p. 1587)
