Angèle Schmitz
LinkedIn
25th May 2023

It's time for the tax return!

You remember that famous letter from the Tax Administration (Administration des Contributions Directes - ACD), asking you to fill in your tax return. You tucked it away since the new deadline is 31 December 2023 for the 2022 tax return. Did you know that not everyone is affected? Why not? Find the answers below.

Who has to file a tax return?

Not everyone needs to fill in a tax return! There are certain cases in which an employed or retired taxpayer is obligated to fill in a tax return. Those who do not fall into this bracket are free to decide if they want to make one or not.

In general, it is advisable to fill in a tax return, when, for example, you have taken out insurance products or others that grant entitlement to a tax allowance. Now, you can also enter the amount paid to your home purchase savings plan or a private pension scheme on your tax card. This way, you don’t need to report them separately. 

First, let’s have a look at the five most common situations in which a taxpayer must fill in a tax return: (source : myguichet.lu au 24.05.2023) : 

  • the annual taxable income at source in Luxembourg exceeds EUR 100,000; or 

  • in case of multiple income streams or pensions taxable at source in Luxembourg, the annual income exceeds EUR 36,000 for tax classes 1 or 2, or exceeds EUR 30,000 for tax class 1A. 

    • Examples: 

    • taxpayers employed concurrently by several employers; 

    • pensioners receiving several pensions; 

    • married taxpayers taxed and filing jointly, both of whom are employed or receive a pension; or 

  • taxpayers whose taxable income in Luxembourg is not subject to tax withholdings, such as: 

    • earnings from self-employment; 

    • rental property income; 

    • wages or salaries paid by a foreign employer, or pensions paid by a foreign pension fund; or 

  • taxpayers whose taxable income includes more than EUR 1,500 in net investment income subject to withholding tax, such as dividends; 

  • taxpayers whose taxable income includes more than EUR 1,500 in directors’ fees; 

  • spouses who are not separated, one of whom is a resident taxpayer and the other a non-resident, who chose to be jointly taxed and who provisionally obtained tax class 2 on their tax card.  

The taxpayer is also required to declare their income if the Luxembourg Inland Revenue (Administration des contributions directes - ACD) so requests. 

 

Not everyone needs to file a tax return!

Taxpayers who do not satisfy the conditions for filing an income tax return may, under certain conditions, submit a request for an adjustment of tax withholdings by way of the annual adjustment procedure. 

In particular, it is in the interest of taxpayers to file an annual adjustment request when:  (source myguichet.lu 24.05.2023) : 

  • they begin their professional career in Luxembourg in the course of the year after completing their studies; or 

  • they work as temporary workers (interim) and have variable or zero monthly earnings; or 

  • they work in Luxembourg for only part of the year (arrival or departure during the year) and their income earned abroad is proportionally lower than that earned in Luxembourg; or 

  • they wish to claim deductible expenses, such as: 

    • professional expenses (a category including work-related expenses); 

    • pensions paid to the divorced spouse, such as maintenance or other support payments; 

    • mandatory social security contributions and deductions; 

    • insurance contributions and premiums; 

    • premiums paid into a private pension plan; 

    • payments into a home purchase savings account; 

    • contributions for a supplementary pension scheme; 

    • gifts or donations, etc.; or 

  • they wish to request the single-parent tax credit; or 

  • they wish to request a tax reduction in the form of tax relief, etc. 

Why file a tax return if I am not obligated to do so?

The taxpayer who is not obliged to file a tax return, however, has the option to voluntarily file a tax return. 

Taxpayers who (source myguichet.lu 24.05.2023) :

wish to deduct the interest expenses on a loan taken out for their main residence or for any other real estate that they built or which is under construction;
wish to deduct the interest expenses on a loan taken out for their main residence or for any other real estate that they built or which is under construction;
have requested to be taxed jointly with their partner in order to qualify for the class 2 tax rate.
have requested to be taxed jointly with their partner in order to qualify for the class 2 tax rate.
The 3 neighboring countries of Luxembourg all recognise formal civil partnerships, namely the "Civil Solidarity Pact" in France, the "Legal Cohabitation Contract" in Belgium and the "Eingetragene Lebenspartnerschaft" in Germany;
are spouses that are not separated, one of whom is a resident taxpayer and the other is a non-resident who chose to be taxed jointly in Luxembourg
are spouses that are not separated, one of whom is a resident taxpayer and the other is a non-resident who chose to be taxed jointly in Luxembourg
provided that the resident taxpayer has earned 90 % of the household's income during the tax year.

In order to reduce the tax burden, the taxpayer can deduct costs such as special expenses, e.g.:

  • house scheme savings contributions ; 

  • insurance premiums,  

  • interest on a consumer loan,  

  • annuities paid in connection with a divorce,  

  • donations made to charitable or non-governmental development organisations, etc.  

or extraordinary expenses (sickness, disability costs borne by the taxpayer, etc.). 

3 areas in which you can benefit from tax deductions

S-PENSION plan
Secure your future and protect your living standards during retirement!
S-Pension plan
Housing savings scheme
Save up in order to buy, build or renovate your home!
Housing savings scheme
Life insurances
Prepare your children’s future and protect yourself against life’s misfortunes!
Life insurance

When do I need to file the tax return?

The deadline for filing income tax returns for resident and non-resident individuals is 31 December of the year following the tax year concerned.  

Couples who are in a civil partnership can opt for joint taxation, according to tax class 2, but only if the partnership has existed throughout the taxation year! 

 

Whom can you consult?

Our advisors are at your disposal if you wish to invest in fiscal products that are adapted to your personal situation and allow you to ease your tax burden. If you have questions about your taxes, follow Sophie and Marc’s example and contact a tax consultant. Finally, there are different useful websites that you can consult, such as www.impotsdirects.public.lu or www.guichet.lu. 

Make it easy on yourself with myTax!

Another option is to file your tax return with myTax, VIREO's digital tax assistant, available in your Tax Area on S-Net Desktop.  

With myTax, you will only have to answer some simple questions and your tax return is generated automatically. It is simply impossible to make a mistake! 

At the end of the questionnaire, your myTax report tells you whether you are obliged to file a tax return or whether it is in your interest to do so.  

It also includes advice on whether you should be taxed collectively or individually and how much you should reclaim or will need to pay. 

myTax

VIREOs intelligent digital assistant

Click here to find out more!
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