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Tax credits

Luxembourg has a system of employment tax credits intended to encourage employment.

The tax credit applies to all employees with income of at least EUR 936 per annum and the amount of the credit varies depending on the individual's annual income. There is no employment tax credit for annual income of EUR 80,000 or more.

In addition to the employment tax credit, taxpayers may benefit from a variety of other tax credits that apply according to personal circumstance (eg a single parent tax credit).

The employment tax credit is shown on an employee's tax card. Withholding tax is calculated according to the tax tables described in 2.1.2 and then the resultant amount is reduced by the tax credit. See example below. If the employee's actual tax is less than the value of the credit, then the surplus credit is paid to the employee.

Employment tax credit (CIS) rates for 2024