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Employing in Luxembourg

At a glance

Employment in Luxembourg

The employment relationship in Luxembourg is governed by the 2006 Labour Code.

If you’re a national of a European Union (EU) country, you already have the right to work in the Luxembourg under the EU’s freedom of movement provisions. Luxembourg reports around 40 per cent foreigners in the general population. As a matter of fact, the internal market is characterized by the major role played by Belgian, French and German who constitute more than 50% of the labour force in the territory.

The main sources of labour law are international treaties, European law, Luxembourg employment laws and regulations and collective bargaining agreements.

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Payroll & Tax in Luxembourg

Computed on average income statistics and the income tax rate, the cost of living in Luxembourg is relatively high. Taxes in Luxembourg, however, are lower compared to neighboring European countries.

Given the territoriality of tax, only companies that have a sufficiently strong attachment with Luxembourg have unlimited tax liability.

This is valid for resident companies, i.e. a company who has its registered office or centre of effective management in Luxembourg.

Non-resident companies, i.e. a company whose registered office is not in Luxembourg but who generates Luxembourg income is subject to limited tax liability.

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Immigration / Work Permits in Luxembourg

Foreign workers are required to have the proper visas and work permits in Luxembourg, as established by immigration laws.  Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Luxembourg market.  If you have yet to complete the incorporation process you can use an outsourced management company or GEO to sponsor the employee for the necessary permits.

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Incorporation

A foreign investor who comes to Luxembourg and intends to set up a company must be aware of the possibilities he has. One of the most important things to know is the best suited type of company that fits the interests of the entrepreneur.

The most popular type chosen by foreign investors who want to set up company in Luxembourg is the limited liability company.

There are five main types of business available to foreign companies in Luxembourg, regulated under Luxembourg law on commercial companies (15 August 1915 – the “Companies Law”):

  • Société Anonyme or S.A. (equivalent to a public limited liability company)
  • Société à Responsabilité Limitée or S.à r.l. (equivalent to a private limited liability company)
  • Société en Nom Collectif or S.e.N.C. (equivalent to a general corporate partnership)
  • Société en Commandite Simple or S.e.C.S. (equivalent to a limited corporate partnership)
  • Sole Proprietorship
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GEO Solutions or DIY Employment in Luxembourg?

GEO Solutions or DIY Employment

Companies entering Luxembourg must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Luxembourg Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Luxembourg entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally, Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Luxembourg

Payroll Luxembourg
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
Up to € 11 265 0
€ 11 265 - € 13 173 8
€ 13 173 - € 15 081 10
€ 15 081 - € 16 989 12
€ 16 989 - € 18 897 14
€ 18 897 - € 20 805 16
€ 20 805 - € 22 713 18
€ 22 713 - € 24 621 20
€ 24 621 - € 26 529 22
€ 26 529 - € 28 437 24
€ 28 437 - € 30 345 26
€ 30 345 - € 32 253 28
€ 32 253 - € 34 161 30
€ 34 161 - € 36 069 32
€ 36 069 - € 37 977 34
€ 37 977 - € 39 885 36
€ 39 885 - € 41 793 38
€ 41 793 - € 100 000 39
Over € 100 000 40

Luxembourg income tax liability is based on the individual’s personal situation (e.g. family status). For this purpose, individuals are granted a tax class. Three tax classes have been defined:

 

– Class 1 for single persons.

– Class 2 for married persons as well as civil partners (under certain conditions).

– Class 1a for single persons with children as well as single taxpayers aged at least 65 on 1 January of the tax year.

 

Married non-resident taxpayers who are not separated can aim for a tax class 2 if they are taxable in Luxembourg on more than 50% of the professional income of their household. If both spouses derive professional income taxable in Luxembourg, the application of tax class 2 leads to a combined assessment. Unseparated married non-resident taxpayers who do not comply with the above 50% condition are granted the tax class 1 or 1a.

 

Tax is calculated in accordance with a progressive table, ranging from 8% on taxable income in excess of 11,265 euros (EUR) to 40% on income in excess of EUR 100,000 for 2015. A solidarity tax of 7% of taxes (9% for taxpayers earning more than EUR 150,000 in tax class 1 and 1a or more than EUR 300,000 in tax class 2) must also be paid.

Tax Returns Supplied

Yes

Employers Social Security and statutory contributions

11.05% calculated on gross salary

Employees Social Security and statutory contributions

12.72%- 14.89%, calculated on gross salaries

Insurance requirements

Insurance Contracts: 4% on the insurance premium.

Corporate Income Tax Rate

22.47% on taxable profits

Sales Tax

VAT: 15%

Withholding Tax

Withholding tax:

Dividends 15%;

Interests 15%.

Other Tax

Municipal Tax: 6% calculated on taxable profits with an allowance of EUR 17,500.

Work Permits
Business Visas
Others
+1 877 457 7691
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