Beneficiaries of interest payments must declare them to the tax authorities of their country of residence. In Luxembourg, the non-resident taxpayer who requests to be treated as a resident for tax purposes must also declare his interest payments in Luxembourg.
Certain types of interest paid to a Luxembourg resident taxpayer by a Luxembourg bank is automatically subject to a Luxembourg withholding tax of 20 %.
Other interest payments to a Luxembourg resident taxpayer may be subject upon request to a 20 % withholding tax. The bank or paying agent must be foreign undertakings, not Luxembourgish.
The 20 % withholding tax is neither refundable nor creditable against other tax liabilities in Luxembourg.
Who is concerned
This applies to the following:
- the resident taxpayer receiving interest payments;
- the non-resident taxpayer receiving interest payments and who opts to be treated as a Luxembourg resident for tax purposes.
In order to opt for the 20 % withholding, the taxpayer must:
- be a Luxembourg resident; and
- receive foreign interest payments, i.e. paid by paying agents established in a Member State of the European Union or the European Economic Area (EEA - Iceland, Liechtenstein, Norway).
The non-resident taxpayer treated as a resident taxpaxer cannot opt for this 20 % withholding.
DeadlinesIncome must be reported by March 31 of the year following the income allocation at the latest. Past this deadline, the beneficial owner can no longer opt for withholding. This choice is irrevocable for the year in question.
How to proceed
Interest paid by a paying agent established in Luxembourg
Beneficiaries must declare the interest received to the tax authorities in their country of residence. In Luxembourg they must, in principle, be reported in the income tax return (form 100), in the category net income from movable assets.
Any interest paid to a Luxembourg resident and paid by a bank, paying agent, fiduciary, credit institute, distributor or specialised service provider established in Luxembourg is automatically subject to the 20 % withholding tax provided the interest is generated by:
- current accounts and sight deposit accounts, if the annual interest rate is higher than 0.75 %;
- sight savings accounts and term deposits if the amount of interest exceeds EUR 250 per taxpayer and paying agent;
Resident Luxembourg taxpayers who receive interest subject to 20 % withholding tax levied directly by a paying agent established in Luxembourg no longer has to declare the interest in their tax return.
The following are not concerned by the withholding tax:
- non-resident beneficiaries or non-resident beneficiaries treated as residents for tax purposes;
- legal persons who receive interest payments;
- natural persons who receive interest on the profits from a commercial enterprise, an agricultural or forestry business, or on the profits from a self-employed activity;
- interest from investment funds.
Following the introduction of the automatic exchange of information regarding interest payments between the tax administrations of the different EU Member States or similar, the RIUE no longer applies.
From 1 July 2005 to 31 December 2014, under the European Savings Directive, Luxembourg paying agents had to deduct a 35 % withholding tax on certain interest payments to a taxpayer residing in another Member State of the European Union (RIUE law) or to a resident of certain dependent or associated territories (Dutch Antilles, Aruba, Guernsey, Isle of Man, British Virgin Islands, Jersey, Montserrat). The withholding tax at source of 35 % did not apply when the non resident taxpayer in Luxembourg opted for the exchange of information.
A RIUE levied on an interest payment could be charged against the remaining tax payable in the recipient's state of residence.
Interest payments by a paying agent established abroad
Beneficiaries must declare interest received to the tax authorities in their country of residence.
Interest paid by a paying agent established abroad is not subject to the Luxembourg withholding tax of 20 %.
The Luxembourg resident taxpayer or non-resident treated as resident for tax purposes must indicate the interest received in the income tax return (form 100), in the category net income from movable assets. This income is subject to standard progressive rates (between 0 % and 42,80 %, or even 43,60 %), and subject to the long-term care insurance contribution.
The resident taxpayer can opt for a 20 % withholding by declaring all of his or her interest payments received by using form 931. The paying agent must be established in a Member State of the European Union or the European Economic Area (EEA - Iceland, Liechtenstein, Norway). The non-resident taxpayer treated as a resident taxpaxer cannot opt for the 20 % withholding.
A minimum lump sum of EUR 25 can be deducted as expenses for the acquisition of income (frais d'obtention - FO) in the tax return. If the actual amount of theses expenses is higher than the lump sum, it is necessary to indicate the actual amount.
Foreign withholding tax, non-Luxembourgish
In accordance with a bilateral convention, a foreign, non-Luxembourg withholding from a foreign interest payment can be charged against the rest of the tax payable in the country of residence of the beneficiary.
The taxpayer is requested to attach all documents that indicate the amount of interest received.
The Luxembourg Inland Revenue reserves the right to request additional supporting documents as part of the process of verifying any information, statements, applications, declarations, claims or appeals submitted to its offices.
Forms / Online services
Income tax return for resident and non-resident natural persons (form 100)
Déclaration pour l'impôt sur le revenu pour personnes physiques résidentes et non résidentes (modèle 100)
Einkommensteuererklärung für ansässige und nicht ansässige Personen (Vordruck 100)
Déclaration de la retenue d'impôt à la source libératoire sur certains paiements d'intérêts effectués hors du Luxembourg (déclaration des personnes physiques qui sont des résidents du Luxembourg) Date de forclusion : 31.03.2017 (modèle 931)
Erklärung der Abgeltungsquellensteuer auf bestimmten Zinserträgen getätigt außerhalb des Großherzogtums Luxemburg (Erklärung der natürlichen Personen, die ihren Wohnsitz im Großherzogtum Luxemburg haben) Ausschlussfrist: 31.03.2017 (Vordruck 931)