Tax implications in the event of a civil partnership

Last updated more than 5 years ago

Generally speaking, joint taxation of civil partners gives rise to a reduction in the partners' overall tax burden when one of the civil partners has little or no income.

For the purposes of direct taxes in Luxembourg, civil partners are precluded from joint monthly taxation at source, and their tax cards are unaffected by their partnership.

Resident or non-resident taxpayers bound by a civil partnership formed in Luxembourg or abroad are only taxed jointly after the year has ended, by assessment, at their request, by filing the 'form 100' income tax return.

Resident or non-resident civil partners who opt to be taxed jointly are treated, for tax purposes, in the same way as married couples. They are subject to the following tax benefits in particular:

Should the civil partners decide not to opt for joint taxation, they will be liable for taxation on the basis of their individual incomes.

Under certain circumstances, same-sex couples married abroad may, upon joint request, be taxed jointly.

Prerequisites

  • The civil partnership must have existed for the entire tax year, i.e., from 1 January to 31 December.
  • During that period, the civil partners must have shared a common home or residence.

Deadlines

If, further to their request, a taxpayer is allowed to be taxed by assessment, the deadline for submitting their tax return for year N is 31 December of tax year N+1.

How to proceed

Implications of civil partnerships for resident taxpayers

Under certain circumstances, partners in a civil partnership formed in Luxembourg or abroad may, at their request, opt for joint taxation. They will then be eligible for taxation in tax class 2 for the entire tax year.

In tax class 2, tax is calculated using the "splitting" method:

  • the partners' income is aggregated;
  • this aggregate income is 'split' in 2 halves;
  • the base rate is applied to each half of the aggregate income;
  • the 2 tax liabilities are then added together.

Taxpayers who are taxed jointly are jointly and severally liable for the payment of tax.

Implications with respect to tax cards (employees or pensioners)

Tax cards are not affected by civil partnerships. Where both civil partners are employees in Luxembourg (or both receive a pension that is taxable in Luxembourg), they are not required to carried out any particular formalities with respect to their tax cards (carte d’impôt).

The same is true if only one of the civil partners is an employee (or pensioner) in Luxembourg.

Neither of the civil partners employed (or receiving a pension) in Luxembourg is eligible for taxation in tax class 2 while their tax card is being issued or amended, regardless of whether their civil partnership has existed for the entire tax year or not.

Implications with respect to the income tax return

Under certain circumstances, partners in a civil partnership formed in Luxembourg or abroad may, at their request, be taxed jointly by filing a tax return. They would then be eligible for taxation in tax class 2.

To be taxed jointly, the civil partners must satisfy 3 conditions:

  • the civil partners must request to be taxed jointly by ticking box 301 on page 3 of the 'form 100' tax return, and must both sign the tax return;
  • the civil partners must have shared a common home (or residence) for the entire tax year;
  • their civil partnership must have been in existence for the entire tax year.

Civil partners may not be taxed jointly for the year in which the civil partnership is registered, or for the year in which the partnership ends.

When submitting their first request for joint taxation, civil partners must enclose the following with their tax return:

  • in the case of a civil partnership formed in Luxembourg: a copy of the certificate issued by the public prosecutor's office (Parquet général) in connection with the listing of the civil partnership in the civil register;
  • in the case of a civil partnership formed abroad: the document issued by the relevant authorities in the state in which the civil partnership formed, attesting that the civil partnership had existed for the entire tax year in question. Note that the 3 countries that have borders with Luxembourg all recognise some form of civil partnership, namely:
    • France: the civil solidarity pact (pacte civil de solidarité or PACS);
    • Belgium: the legal cohabitation contract (contrat de cohabitation légale);
    • Germany: the registered partnership (eingetragene Lebenspartnerschaft).

Civil partnerships can also be registered with the Luxembourg civil register. For purposes of direct taxes, such registration is not a requirement.

In filing their tax return, civil partners must report all of the income they earned in the year. They are eligible for the following tax benefits in particular:

Extra-professional tax allowance

The extra-professional allowance applies to civil partners:

The extra-professional allowance is granted automatically by the Luxembourg Inland Revenue. Consequently, the partners do not need to apply for the allowance in their tax return.

On the other hand, where one of the civil partners has been retired for fewer than 3 years and the other civil partner receives earned income, the extra-professional allowance can be claimed by ticking box P2 on page 8 of the tax return form.

Civil partners who have requested joint taxation for a given year may withdraw their request on an individual basis provided that the tax assessment for the year in question has not yet been issued.

Civil partners who do not file a joint tax return can file a tax return individually to report their own income. In that case, they will not be taxed jointly and each civil partner will be taxed in class 1 or 1A, as applicable.

Implications with respect to the annual-adjustment procedure

Civil partners who do not wish to be taxed jointly, or who do not satisfy the 3 conditions required for joint taxation (see above), will be taxed individually as if they were single.

If one civil partner fails to submit a tax return, they can submit an application to have the tax withheld from their salary (or pension) adjusted by means of an individual annual adjustment.

Implications of civil partnerships for non-resident taxpayers

Under certain circumstances, partners in a civil partnership formed in Luxembourg or abroad may, at their request, opt for joint taxation. They will then be eligible for taxation in tax class 2 for the entire tax year.

In tax class 2, tax is calculated using the "splitting" method:

  • the partners' income is aggregated;
  • this aggregate income is 'split' in 2 halves;
  • the base rate is applied to each half of the aggregate income;
  • the 2 tax liabilities are then added together.

Taxpayers who are taxed jointly are jointly and severally liable for the payment of tax.

Implications with respect to tax cards (employees or pensioners)

Where both civil partners are employees in Luxembourg (or both receive a pension that is taxable in Luxembourg), they are not required to carried out any particular formalities with respect to their tax cards in the event of civil partnership.

The same is true if only one of the civil partners is an employee (or pensioner) in Luxembourg.

Neither of the civil partners employed (or receiving a pension) in Luxembourg is eligible for taxation in tax class 2 while their tax card is being issued or amended, regardless of whether their civil partnership has existed for the entire tax year or not.

Implications with respect to the income tax return

Under certain circumstances, partners in a civil partnership may, at their request, be taxed jointly by filing a tax return. They would then be eligible for taxation in tax class 2.

To be taxed jointly, the civil partners must satisfy the following conditions:

  • at least 90 % of the non-residents civil partners' worldwide (domestic and foreign) income must be liable for taxation in Luxembourg (50 % of their earned income in the case of civil partners residing in Belgium). The 90 % threshold can be calculated by reference to the partners' individual situation;
  • the partners must opt to be treated as resident taxpayers. This means that they must report all of their income earned in Luxembourg and abroad, and that they would then be eligible for the full tax relief that is generally reserved for residents;
  • the civil partners must request to be taxed jointly by ticking box 301 on page 3 of the tax return form, and must both sign the tax return;
  • the civil partners must have shared a common home (or residence) for the entire tax year;
  • their civil partnership must have been in existence for the entire tax year.

Civil partners may not be taxed jointly for the year in which the civil partnership is registered, or for the year in which the partnership ends.

When civil partners file their first request for joint taxation, they must enclose, with their tax return, the document issued by the relevant authorities in the state in which the civil partnership was registered, attesting that the civil partnership had existed for the entire tax year in question. Note that the 3 countries that have borders with Luxembourg all recognise some form of civil partnership, namely:

  • France: the civil solidarity pact (pacte civil de solidarité or PACS);
  • Belgium: the legal cohabitation contract (contrat de cohabitation légale);
  • Germany: the registered partnership (eingetragene Lebenspartnerschaft).

Civil partnerships can also be registered with the Luxembourg civil register. For purposes of direct taxes, such registration is not a requirement.

In filing their tax return, civil partners must report all of the income (domestic and foreign) they earned in the year. They are eligible for the following tax benefits in particular:

Extra-professional tax allowance

The extra-professional allowance applies to civil partners:

The extra-professional allowance is granted automatically by the Luxembourg Inland Revenue. Consequently, the civil partners do not need to apply for the allowance in their tax return.

On the other hand, where one of the civil partners has been retired for fewer than 3 years and the other civil partner receives earned income, the extra-professional allowance can be claimed by ticking box P2 on page 8 of the tax return form.

Civil partners who have requested joint taxation for a given year may withdraw their request on an individual basis provided that the tax assessment for the year in question has not yet been issued.

Civil partners who do not file a joint tax return can file a tax return individually to report their own income. In that case, they will not be taxed jointly and each civil partner will be taxed in class 1 or 1A, as applicable.

Implications with respect to the annual-adjustment procedure

Civil partners who do not wish to be taxed jointly, or who do not satisfy the 5 conditions required for joint taxation (see above), will be taxed individually as if they were single.

If one civil partner fails to submit a tax return, they can submit an application to have the tax withheld from their salary (or pension) adjusted by means of an individual annual adjustment.

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