Considering 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.
A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Luxembourg. Under Luxembourg law, companies registered in other countries are allowed to obtain a license to do business and have employees in Luxembourg.
In some cases, a company will register their business in Luxembourg under one of the forms available: S.A., S.à.r.l., S.e.N.C.S., S.e.C.S. and Sole Proprietorship but prefer to have another company administering its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Larger companies with a commitment to Luxembourg may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Luxembourg payroll, and can fulfil all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Irish employment laws.
Companies can outsource the employment and payroll of their staff in Luxembourg to a GEO, like Shield GEO. This is possible for both foreign workers and Luxembourg nationals. This is the easiest, fastest and safest way to payroll staff in Luxembourg.
Shield GEO manages all aspects of payroll for workers in Luxembourg, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.
Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.
Read more about outsourced payroll and employment through Shield GEO.
|Corporate Income Tax ?||
22.47% on taxable profits
|Income Tax Rate ?||
|Sales Tax ?||
|Withholding Tax ?||
|Employee Social Security (EE SS)||
12.72%- 14.89%, calculated on gross salaries
|Employer Social Security (ER SS)||
11.05% calculated on gross salary