Taxpayers may deduct certain expenses from their taxable income. These expenses include various ongoing allowance payments and charges incurred by the taxpayer which are tax-deductible under certain conditions. These include:

• payments made to a divorced spouse;
• ongoing allowance payments and charges due by virtue of a specific obligation;
• child support or maintenance payments;
• life annuities.

The deduction limit for these charges varies according to the type of allowances paid during the year by the taxpayer.

Who is concerned

These expenses may be deducted by:

• any resident taxpayer in Luxembourg who files an income tax return at the latest on 31 March of the year following the tax year under consideration;
• any non-resident taxpayer who files an income tax return and who opts to be treated as a Luxembourg resident for tax purposes at the latest on 31 March of the year following the tax year under consideration;
• any taxpayer residing in Luxembourg—whether an employee or a pensioner—who requests an adjustment of the tax withholdings on wages and salaries through an annual adjustment by no later than 31 December of the year following the tax year under consideration;
• any taxpayer who resides in Luxembourg, be they an employee or a pensioner, who applies to have expenses listed on their tax card in the tax year in question.

Prerequisites

Ongoing allowance payments and charges incurred during the year are tax-deductible if they satisfy the following conditions:

• the allowance payments to a divorced spouse were made following a divorce pronounced by court decision before 1 January 1998;
• the allowance payments to a divorced spouse were made following a divorce pronounced by court decision after 31 December 1997;
• the allowance payments to a divorced spouse were made following a divorce by mutual consent;
• the ongoing allowance payments and charges were due by virtue of a specific obligation, such as allowance payments under a contract, a legal provision or a court decision (no obligation to provide maintenance);
• life annuity payments in consideration of an economic benefit (no obligation to provide maintenance);
• (annuity instalments) to persons who, if they found themselves in need, would be entitled, according to the provisions of the civil code, to claim support from the taxpayer (obligation to provide maintenance). Such payments must have been stipulated when a property was transferred and must not be excessive in comparison to the value of the transferred property (situation referred to as a donation with charges).

How to proceed

Tax deduction evaluation methods

Taxpayers may claim the deduction of ongoing allowance payments made during the year using one of the following methods:

• by filing an income tax return by no later than 31 March of the year following the tax year in question;
• by requesting an adjustment of tax withholdings on wages and salaries by means of an annual adjustment, by no later than 31 December of the year following the tax year in question;
• by having an entry recorded on their tax card during the tax year in question.

Deduction by filing an income tax return as a resident taxpayer

A resident taxpayer who files a tax return may deduct the ongoing allowance payments or charges incurred during the year from their taxable income.

These ongoing allowance payments or charges must be reported on page 13, Section 1 - Special expenses covered by the minimum flat-rate allowance, in Chapter A entitled 'Annuity payments and ongoing charges' of the income tax return (model 100) as follows:

Cell 1301

In this cell, the taxpayer must report the following ongoing allowance payments and charges:

• ongoing allowance payments and charges due by virtue of a specific obligation;
• life annuities;
• maintenance payments.

This allowance payments are deductible from the taxpayer's taxable income, with no limit. However, only 50 % of the life annuity payments in consideration of a global benefit are deductible.

Cell 1302

In this cell, the taxpayer must report allowance payments made to a divorced spouse by virtue of a divorce by mutual consent. These allowance payments are deductible from the taxpayer's taxable income up to a maximum of EUR 24,000 per year and per divorced spouse, regardless of the date of the divorce. These allowances are taxable for the beneficiary ex-spouse.

Cell 1303

In this cell, the taxpayer must report allowance payments made to a divorced spouse by virtue of a divorce pronounced by court decision after 31 December 1997. These allowance payments are deductible from the taxpayer's taxable income up to a maximum of EUR 24,000 per year and per divorced spouse. These allowance payments are taxable for the beneficiary as income from allowances or pensions.

Cell 1305

In this cell, the taxpayer must report allowances payments made to a divorced spouse by virtue of a divorce pronounced by court decision after 1 January 1998. They are deductible from the taxpayer's taxable income up to a maximum of EUR 24,000 per year and per divorced spouse if the taxpayer attaches a joint written request on plain paper, signed by both of the former spouses. In this case, the allowance payments may be deducted as special expenses. On the other hand, for the beneficiary ex-spouse, these allowance payments are taxable as income from allowances or pensions.

If no joint request is attached to the income tax return, the taxpayer may qualify for an allowance for extraordinary expenses for the maintenance payments made to the divorced spouse (to the extent that the charges exceed a certain percentage of the taxable income). However, the allowance payments will be tax-exempt for the beneficiary ex-spouse.

Deduction by filing an income tax return as a non-resident taxpayer

Non-resident taxpayers may request the deduction of allowance payments only:

• if they opt to be treated as a resident for tax purposes;
  and
• the request is made in an income tax return (taxation on an assessment basis) filed at the latest by 31 March of the year following the tax year under consideration.

These deductible ongoing allowance payments or charges must be reported on page 13, Section 1 - Special expenses covered by the minimum flat-rate allowance, in Chapter A entitled 'Annuity payments and ongoing charges' as follows:

Cell 1301

In this cell, the taxpayer must report the following ongoing allowance payments and charges:

• ongoing allowance payments and charges due by virtue of a specific obligation;
• life annuities;
• maintenance payments.

This allowance payments are deductible from the taxpayer's taxable income, with no limit. However, only 50% of the life annuity payments in consideration of a global benefit are deductible.

Cell 1302

In this cell, the taxpayer must report allowance payments made to a divorced spouse by virtue of a divorce by mutual consent. These allowance payments are deductible from the taxpayer's taxable income up to a maximum of EUR 24,000 per year and per divorced spouse, regardless of the date of the divorce. These allowances are taxable for the beneficiary ex-spouse.

Cell 1303

In this cell, the taxpayer must report allowance payments made to a divorced spouse by virtue of a divorce pronounced by court decision after 31 December 1997. These allowance payments are deductible from the taxpayer's taxable income up to a maximum of EUR 24,000 per year and per divorced spouse. These allowance payments are taxable for the beneficiary as income from allowances or pensions.

Cell 1305

In this cell, the taxpayer must report allowances payments made to a divorced spouse by virtue of a divorce pronounced by court decision after 1 January 1998. They are deductible from the taxpayer's taxable income up to a maximum of EUR 24,000 per year and per divorced spouse if the taxpayer attaches a joint written request on plain paper, signed by both of the former spouses. In this case, the allowance payments may be deducted as special expenses. On the other hand, for the beneficiary ex-spouse, these allowance payments are taxable as income from allowances or pensions.

If no joint request is attached to the income tax return, the taxpayer may qualify for a tax allowance for extraordinary expenses for the maintenance payments made to the divorced spouse (to the extent that the charges exceed a certain percentage of the taxable income). However, the allowance payments will be tax-exempt for the beneficiary ex-spouse.

Deduction by requesting an adjustment of the tax withholdings on wages and salaries through the annual-adjustment method.

A resident taxpayer, be they an employee or a pensioner, who does not satisfy the conditions for filing an income tax return, may deduct, from their taxable income, allowance payments to their divorced spouse incurred further to a divorce, by sending a request for an adjustment of tax withholding on wages and salaries by means of an annual adjustment, by no later than 31 December of the year following the tax year considered.

The taxpayer must complete page 4 of model 163 R F (Boxes 401 - 405).

If the taxpayer is submitting their request for the first time, they must attach a copy of the divorce certificate as well as proof of the payments.

These documents must be returned to the competent RTS Tax Office. The competent office depends on the taxpayer's domicile.

A non-resident taxpayer may request that allowances be deducted only if they apply to be treated as a resident for tax purposes and if they file an income tax return (taxation on an assessment basis).

Deduction by way of an entry on the tax card

Resident taxpayers, be they an employee or a pensioner, may have allowance payments to their ex-spouse further to a divorce recorded on their tax card.

The taxpayer must send:

• their original tax card;
• form 164 R, for residents.

The request to correct/update the tax card should be returned to the tax office which handles tax withholdings on wages and salaries. The competent office depends on the taxpayer's domicile.

The request must be accompanied by the following documents:

• a copy of the divorce certificate (for first-time requests);
• proof of payment.

Entries recorded on the tax card are only valid for one year and must be renewed each year if the conditions have been met.

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