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4th March 2019

It's time for the tax return!

At the beginning of February, Sophie’s parents received a letter from the Luxembourg Direct Tax Authority (Administration des Contributions Directes, ACD), asking them to fill in and send back their joint tax return. However, Sophie and Marc have not been contacted by the ACD and Sophie is wondering why. So, who has to declare what and when? No stress Sophie, you'll 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:

  • Household with Luxembourg taxable income of over 100.000 euros.
  • When there is a combination of several incomes (wages or pensions) and a combined amount exceeding 36.000 euros for taxpayers in class 1 and 2, and exceeding 30.000 euros for taxpayers in class 1A. The same holds true for non-resident households.
  • If there are other incomes exceeding 600 euros, which are not levied at source by the ACD.
  • If a non-resident partner (in a civil partnership) has opted for joint taxation.
  • When the taxable income includes more than 1.500 euros of indigenous capital subject to withholding tax.
Not everyone needs to file a tax return!

Currently, only resident and non-resident taxpayers placed in class 1 and 1A as well as non-resident taxpayers in class 2 are exempt from filling in a tax return. Starting with the 2018 taxation year, for which the tax return will be done at the start of 2019, this is going to change. Indeed, only taxpayers in class 1 and 1A will be exempt from filing a tax return. Therefore, it is important to check your tax class on the tax card and to report any error to the ACD.

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

In certain cases, a tax return can lighten your tax burden. For example:

in order to deduct certain costs such as special expenses
in order to deduct certain costs such as special expenses
(e.g. contributions to a building savings scheme and insurance premiums, interest on debit balance from a consumer loan, annuities paid in relation to a divorce, donations made to organisations working in the public interest or non-governmental development organisations, etc.) or one-off costs (medical, disability expenses to be paid by the taxpayer, etc.)
when tax is levied at source on investment income
when tax is levied at source on investment income
(e.g. share dividends, bond coupons, etc.)
when there is a loss of income
when there is a loss of income
(e.g. in the case of negative net income from renting a property)

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

Since Sophie has taken out several tax deductible products at her bank, namely a BHW building savings scheme and an S-Pension private pension scheme, she benefits from a reduction in the annual tax amount. She just has to fill in the form 100 which can be found on the website of the ACD, attach a copy of the wage statements of the respective tax year (pensioners must of course join an annuity/pension certificate) and all the documentary proof of the various tax deductible products and others (bank interest statements, indigenous and foreign income, etc.).

When do I need to file the tax return?

Everyone who must fill out a tax return receives from the ACD either the form 100 by post, or an invitation to fill it in online. You need to send the completed tax return until 31 March of the current year. It is entirely possible to file it later, until 31 December, on condition that you request an additional time limit from the ACD. Those who are not obligated but want to file a tax return all the same, can do it until 31 December. This means Sophie still has enough time to decide whether she wants to file one or not!

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! As Sophie and Marc entered their civil partnership during 2017, the couple can make their joint tax return for 2018, in 2019.

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.

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