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Summary
Luxembourg uses a PAYE-style system (retenue d’impot sur les salaires) where employers withhold income tax and social security contributions from each payslip. Income tax is highly progressive with 23 brackets ranging from 0% to 42%, and a solidarity surtax (contribution au fonds pour l’emploi) of 7% or 9% is applied on top of the income tax. Employees pay social security contributions covering pension and health insurance, both subject to an annual ceiling.
How it works
Your take-home pay is your gross salary minus three main categories of deduction:
- Social security contributions (employee share) — pension insurance (8%) and health/CNS (3.05%), plus long-term care and dependency insurance
- Income tax (impot sur le revenu) — highly progressive rates across 23 brackets from 0% to 42%
- Solidarity surtax — 7% of income tax for most taxpayers (9% for those with tax exceeding EUR 10,000)
Tax is calculated based on tax class: class 1 (single), class 1a (single parent or widowed), or class 2 (married/civil partnership). The worked example uses class 1.
Income Tax Rates (2025)
Luxembourg has 23 progressive tax brackets. The key thresholds are:
| Taxable income | Marginal rate |
|---|---|
| Up to EUR 11,265 | 0% |
| EUR 11,266 — EUR 13,173 | 8% |
| EUR 13,174 — EUR 15,009 | 9% |
| EUR 15,010 — EUR 16,881 | 10% |
| EUR 16,882 — EUR 18,753 | 11% |
| EUR 18,754 — EUR 20,625 | 12% |
| EUR 20,626 — EUR 22,569 | 14% |
| EUR 22,570 — EUR 24,513 | 16% |
| EUR 24,514 — EUR 26,457 | 18% |
| EUR 26,458 — EUR 28,401 | 20% |
| EUR 28,402 — EUR 30,345 | 22% |
| EUR 30,346 — EUR 32,289 | 24% |
| EUR 32,290 — EUR 34,233 | 26% |
| EUR 34,234 — EUR 36,177 | 28% |
| EUR 36,178 — EUR 38,121 | 30% |
| EUR 38,122 — EUR 40,065 | 32% |
| EUR 40,066 — EUR 42,009 | 34% |
| EUR 42,010 — EUR 43,953 | 36% |
| EUR 43,954 — EUR 45,897 | 38% |
| EUR 45,898 — EUR 100,002 | 39% |
| EUR 100,003 — EUR 150,000 | 40% |
| EUR 150,001 — EUR 200,004 | 41% |
| Above EUR 200,004 | 42% |
These rates apply to taxable income after deductions and allowances.
Social Security Contributions
Employee contributions (deducted from gross salary)
| Component | Rate | Annual cap |
|---|---|---|
| Pension insurance (assurance pension) | 8.00% | EUR 158,268 |
| Health / CNS (assurance maladie) | 3.05% | EUR 158,268 |
| Long-term care insurance (assurance dependance) | 1.40% | No cap |
| Total employee contributions | ~12.45% | — |
The pension and health caps are based on five times the social minimum wage. Long-term care insurance applies to total income without a cap.
Employer contributions (not deducted from salary)
The employer pays matching pension (8%) and health (3.05%) contributions, plus occupational accident insurance and other levies.
Solidarity Surtax (Contribution au Fonds pour l’Emploi)
A surtax is applied on top of the calculated income tax:
- 7% of income tax for taxpayers with annual tax up to EUR 10,000
- 9% of income tax for taxpayers with annual tax above EUR 10,000
This surcharge funds employment initiatives and is automatically withheld by the employer.
Worked Example
For a gross annual salary of EUR 60,000 (single, tax class 1):
- Social security contributions:
- Pension: EUR 60,000 x 8.00% = EUR 4,800.00
- Health/CNS: EUR 60,000 x 3.05% = EUR 1,830.00
- Long-term care: EUR 60,000 x 1.40% = EUR 840.00
- Total social security: EUR 7,470.00
- Taxable income (simplified): EUR 60,000 - EUR 7,470 = EUR 52,530.00 (before applying standard deductions and allowances)
- Income tax (progressive calculation across 23 brackets):
- EUR 0 — EUR 11,265 at 0% = EUR 0
- EUR 11,266 — EUR 13,173 at 8% = EUR 152.64
- EUR 13,174 — EUR 15,009 at 9% = EUR 165.24
- EUR 15,010 — EUR 16,881 at 10% = EUR 187.20
- EUR 16,882 — EUR 18,753 at 11% = EUR 205.81
- EUR 18,754 — EUR 20,625 at 12% = EUR 224.64
- EUR 20,626 — EUR 22,569 at 14% = EUR 271.88
- EUR 22,570 — EUR 24,513 at 16% = EUR 311.12
- EUR 24,514 — EUR 26,457 at 18% = EUR 349.74
- EUR 26,458 — EUR 28,401 at 20% = EUR 388.80
- EUR 28,402 — EUR 30,345 at 22% = EUR 427.46
- EUR 30,346 — EUR 32,289 at 24% = EUR 466.56
- EUR 32,290 — EUR 34,233 at 26% = EUR 505.18
- EUR 34,234 — EUR 36,177 at 28% = EUR 543.92
- EUR 36,178 — EUR 38,121 at 30% = EUR 583.20
- EUR 38,122 — EUR 40,065 at 32% = EUR 622.08
- EUR 40,066 — EUR 42,009 at 34% = EUR 660.96
- EUR 42,010 — EUR 43,953 at 36% = EUR 699.48
- EUR 43,954 — EUR 45,897 at 38% = EUR 738.32
- EUR 45,898 — EUR 52,530 at 39% = EUR 2,586.48
- Total income tax: ~EUR 10,090
- Solidarity surtax: EUR 10,090 x 9% = EUR 908 (tax exceeds EUR 10,000 threshold, so 9% rate applies)
- Total deductions: EUR 7,470 (social security) + EUR 10,090 (tax) + EUR 908 (surtax) = EUR 18,468
- Take-home pay: EUR 60,000 - EUR 18,468 = ~EUR 41,532/year (~EUR 3,461/month)
Note: This simplified example does not apply the standard employment expense deduction (frais d’obtention), standard minimum deduction, or other personal deductions, which would reduce the tax bill.
Assumptions and Limitations
- 2025 rates only — uses thresholds and rates effective for the 2025 tax year
- Tax class 1 (single) — married couples in class 2 benefit from income splitting, resulting in lower tax
- Employment income only — does not model self-employment, investment income, or rental income
- Simplified taxable income — does not apply the standard employment expense deduction (minimum EUR 540), special expense deductions, or extraordinary charges
- Resident taxpayer — Luxembourg taxes residents on worldwide income; non-residents have different rules
- Gross salary below social security cap — the EUR 158,268 annual cap is not reached in the example