Resident or non-resident taxpayers who are self-employed—i.e., operating a commercial or agricultural or forestry business independently as a sole trader—in Luxembourg must file an income tax return in Luxembourg, and report their taxable income after the close of the tax year. This is known as taxation by assessment.
After the duly completed and signed tax return has been filed by the taxpayer, the tax office will check its content and verify the information and documents provided. The tax office will then issue an income tax assessment and the Revenue Department of the Luxembourg Inland Revenue (Administration des contributions directes) will issue an adjustment based on the information provided on this assessment.
The tax assessment serves as notice of assessment. It summarises the information provided in the income tax return and shows net reported income, the special expenses and allowances to which the taxpayer is entitled, and any adjustments made by the relevant tax office.
The adjustment resulting from the tax assessment recapitulates the amount of income tax to be paid (in the 'balance due' column) or refunded (in the 'excess paid' column), as well as the payment date for tax due.
Taxpayers who filed a joint income tax return each receive a copy of the tax assessment and of the adjustment resulting from the tax assessment.
It should be noted that the tax adaptation law rules out the payment of interest on tax refunds by the state.
Who is concerned
All resident and non-resident taxpayers who are self-employed—i.e., operating a commercial or agricultural or forestry business independently as a sole trader—in Luxembourg who:
- are required to submit an income tax return in Luxembourg;
- receive a tax assessment indicating a tax balance to be paid.
Self-employed taxpayers must file a tax return with the competent tax office.
DeadlinesThe taxpayer must pay the tax due within 1 month of receiving notice of the tax assessment. If notice of the tax due is given in Luxembourg, it will be presumed that notice was given on the third working day after the postmark date. If notice of the tax due is given abroad, notice will be considered to be given on the receipt of the tax assessment.
How to proceed
Payment of tax
Payment of the tax due must be made to the bank account mentioned on the adjustment following the tax assessment. For the Revenue Department of Luxembourg Inland Revenue to be able to process the payment, the bank transfer must include the following information:
- the type of tax (for example, income tax);
- the tax year;
- the taxpayer’s tax number (or file number for taxpayers filing jointly) or, if none has been assigned, the taxpayer’s date of birth.
Failure to meet the payment deadline will generally lead to late payment penalties. A penalty of 0.6 % for each month after the payment date is calculated on the amount of tax due.
Taxpayers who are required to make quarterly advance tax payments must comply with the following payment dates: 10 March, 10 June, 10 September and 10 December of the tax year. If the advance payments are not made by these scheduled dates, the taxpayer will be subject to a late payment penalties of 0.6 % per month, starting with the month following the payment date.
Advance tax payment amounts are set by the relevant tax office on the basis of the most recent tax assessment. Upon receipt of a substantiated request from the taxpayer, the advance payment amounts may be revised. The tax offices strive to ensure the fair and equitable determination of quarterly advance tax payments for taxpayers and update their criteria with each income tax return filed.
Requesting an extension of the payment deadline after receiving the tax assessment
On request, taxpayers may obtain additional time for the payment of the tax due.
To be accepted, the request for an extension of the payment deadline must be:
- substantiated, which means that it must explain the reasons for the request;
- written on a separate sheet of paper;
- sent to the tax office at the address shown on the adjustment received prior to the initial tax payment date.
In principle, requests for deadline extensions will be denied by the tax office if submitted by taxpayers whose financial situation would allow them to easily pay their tax debt.
If a taxpayer’s request is approved by Luxembourg Inland Revenue, a payment schedule will be established so the taxpayer can pay the debt in several instalments over a predetermined period.
When a payment deadline extension is granted, late payment penalties are not applied for the 4 months following the initial payment deadline. Beyond these 4 months, the late payment penalty is calculated as follows:
- 0.1 % per month, for payments between 5 months and 1 year overdue;
- 0.2 % per month, for payments between 1 and 3 years overdue;
- 0.6 % per month, for payments more than 3 years overdue.
Failure to comply with the payment schedule makes normal late payment penalties chargeable on the balance still due of 0.6 % per month, not counting the month of the missed deadline and the month of payment considered as a full month.
If the employee or pensioner disagrees with the tax assessment issued by the relevant tax office, they may contest the decision of the tax authorities before the Director of Luxembourg Inland Revenue.