Obtaining a tax reduction in the form of tax relief

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Residents

In regard to tax, a taxpayer who has one or more children in their household can obtain a tax reduction for dependent children.

The tax reduction may be granted in various forms, namely as

family benefits (tax bonus for children until July 2016) paid by the Children's Future Fund (Caisse pour l'avenir des enfants - CAE); or
financial aid for higher education; or
aid to volunteer workers paid by the National Youth Service (Service national de la Jeunesse – SNJ).

A 4^th form of tax reduction, known as tax relief, is paid by the Luxembourg Inland Revenue (Administration des contributions directes - ACD).

As of 1 January 2018, non-resident married taxpayers will be assigned tax class 1 and will be taxed on their Luxembourgish income only, if they fail to apply for joint taxation.

Unless they are benefiting from tax class 2, resident and non-resident taxpayers who obtain a tax reduction for children, regardless of the form of the reduction, may be taxed in tax class 1A.

Taxpayers who have lost their entitlement to the tax reduction may, in certain circumstances, enjoy tax relief for children for the 2 tax years following the year of expiry of their entitlement to the tax reduction.

Who is concerned

A tax reduction in the form of tax relief is available to taxpayers whether they are married, in a civil partnership or single.

The child in question must belong to the applicant's household and must not be entitled to any other form of tax reduction. Such is the case, for example, if an adult child is under the age of 21 and is not a student or doing voluntary work.

A child is held to belong to the household of the taxpayer with whom they live, even when they live elsewhere for a reason other than that of essentially lucrative work.

Example: when the child lives outside of their parents' home for the purposes of education, and comes home for the holidays, or lives in a specialist institution for disabled people.

Prerequisites

It is not possible to receive the benefit for the same child in 2 different forms.

The tax reduction is an integral part of the family benefit, of the State financial aid for higher education and of the financial aid paid by the National Youth Service.

Consequently, the tax reduction in the form of tax relief can only be granted for children who belong to the taxpayer's household and who are not entitled to any other form of reduction.

Furthermore, during the tax year in question, the child must:

be under the age of 21; or
be at least 21 years old on 1 January and:
- be studying (at the university or be in full-time professional development training); or
- be doing voluntary work; or
- suffer from a handicap or disability.

How to proceed

Application for tax relief

Taxpayers can apply for tax relief by:

filing an income tax return (form 100, page 2); or
applying for an adjustment of the tax withheld on their salary using the annual adjustment procedure (form 163 for residents or non-residents).

Amount of tax relief

The amount of tax relief available is EUR 922.50 per year and per eligible child. It is to be set off against the tax owed.

Individual taxation of parents

During the same tax year, a child may only be held to belong to the household of one of their parents.

When a child conferring entitlement to a tax reduction moves from one household to another during the tax year, they are considered to be part of the household of the taxpayer who first received the reduction for the year in question.

When the parents are taxed individually, the tax relief is granted to one of the parents if:

the child themselves receives the family allowance or State financial aid for higher education or aid from the National Youth Service; or
no family allowance, financial aid for higher education or support for volunteer workers has been paid.

In these 2 specific cases, one of the parents may waive their right to the payment in favour of the other parent, or one of the parents may be designated by both parents as the recipient of the benefit (form 104).

Additional tax deductions

A taxpayer who obtains a tax reduction for children during the tax year, regardless of the form of the reduction, may claim additional tax deductions for certain investments or expenditures incurred during the year.

Supporting documents

The Luxembourg Inland Revenue reserves the right to request supporting documents as part of the process of verifying any information, statements, applications, declarations, claims or appeals submitted to its offices

Forms / Online services

Déclaration pour l'impôt sur le revenu pour personnes physiques résidentes et non résidentes (modèle 100)

Télécharger le formulaire

Einkommensteuererklärung für ansässige und nicht ansässige Personen (Vordruck 100)

Das Formular herunterladen

Décompte annuel (personnes physiques résidentes salariées ou pensionnées non soumises à une imposition par voie d'assiette - 163 R)

Télécharger le formulaire

Lohnsteuerjahresausgleich (ansässige steuerpflichtige Arbeitnehmer und Rentner die nicht einer Besteuerung durch Veranlagung unterliegen - 163 R)

Das Formular herunterladen

Décompte annuel (personnes physiques non résidentes salariées ou pensionnées non soumises à une imposition par voie d'assiette - 163 NR)

Télécharger le formulaire

Lohnsteuerjahresausgleich (nichtansässige steuerpflichtige Arbeitnehmer und Rentner die nicht einer Besteuerung durch Veranlagung unterliegen - 163 NR)

Das Formular herunterladen

Décompte annuel - Modèle 163 - 2022

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Who to contact

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Luxembourg Inland Revenue

45, boulevard Roosevelt
L-2982 Luxembourg
Luxembourg

Please click on the link below to find the competent department.

Luxembourg Inland Revenue Path to Luxembourg Inland Revenue

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