Filing US expat tax returns for American expatriate Luxembourg

By Expat News

Luxembourg is a beautiful country with an extremely high standard of living. American expats in Luxembourg should be aware of high individual income tax rates before making a move. U.S. citizens and green card holders are required to report their worldwide income and to file US expat tax returns in addition to tax filing requirements in Luxembourg. Consequently, we get many questions from prospective expatriate Luxembourg. What are foreign income tax rates in Luxembourg? Do you offer US expatriate tax services for Americans in Luxembourg? Do you help with renunciation process?

Expat Tax Rules and Returns for Expatriate Luxembourg

American expats can minimize the effect of double taxation by applying three IRC provisions.

  • Foreign earned income exclusion. American expatriate Luxembourg can exclude up to $101,300 for 2016 if they have foreign earned income. To learn more about this exclusion, please read What is Foreign Earned Income Exclusion.
  • Foreign housing exclusion. Additionally, an expatriate Luxembourg may be able to deduct foreign housing expenses. The cost of living in Luxembourg is high.
  • Foreign tax credit. American expatriate Luxembourg can take a foreign tax credit for income taxes that they paid in Luxembourg.

There are additional filing requirements if an expatriate Luxembourg have foreign financial assets. American expats might be required to file the FBAR.

Tax system in Luxembourg – FAQ

Is an American expatriate Luxembourg have to pay taxes on the worldwide income?

American expatriate Luxembourg is subject to Luxembourg income tax on worldwide income if s/he is considered a resident. Non-residents are subject to tax only on income sourced from Luxembourg.

Who is considered a tax resident in Luxembourg?

As a general rule, American expatriate Luxembourg is considered a resident in one of the following cases:

– s/he remains in Luxembourg for more than six months in a given calendar year. For example, if a US expatriate arrived on October 1, 2012 and is present in Luxembourg until April 2, 2013, s/he will be considered a resident since October 1, 2012.

– s/he has a permanent home in Luxembourg.

What is the tax year in Luxembourg?

Luxembourg has a calendar tax year that simplifies the process of US expatriate tax preparation.

What is an income tax rate in Luxembourg?

Federal income tax rate has a progressive scale with a maximum rate of 39%.

Which income is taxable in Luxembourg?

Generally, taxable income includes employment income, rental income, portfolio income, annuities and pension, self-employed income and other miscellaneous income. Luxembourg utilizes the adjusted income to calculate a tax due. This is the reason that it is important to keep a track of expenses on overseas taxes.

Can an American expatriate Luxembourg file a tax return on overseas taxes with a spouse?

The income of both spouses is combined to determine a taxable basis. However, couples who are taxed jointly and who receive professional income in Luxembourg, are eligible for EUR 4,500 tax rebate.

Is it a requirement to file a tax return in Luxembourg and pay overseas taxes every year?

A tax return must be filed by March 31. However, if a taxpayer’s only source of income is a salary and the amount doesn’t exceed EUR100,000, then filing a tax return is not required.

Does Luxembourg have a tax treaty or social security agreement with the USA?

The USA and Luxembourg signed a double tax treaty agreement in 1996. In 2009 another agreement was reached to modify a treaty that allows for exchange of tax information on demand. Also, due to totalization agreement between the USA and Luxembourg, US expats can claim social security benefits (except for US Medicare Program) for a job in a corresponding country. Also, Luxembourg plans to implement FATCA in 2014.


This is an overview of basic expatriate tax rules that American expatriate Luxembourg must be aware of before moving and filing US expat tax returns. American expats who have additional questions about US expatriate tax preparation, FATCA, FBARs, social security agreement, renunciation process or any other overseas tax issue, please seek help of an expatriate tax CPA that provides international tax services. International tax experts at Artio Partners will be pleased to review each individual situation.