Luxembourg

Introduction  

Luxembourg is a landlocked country bordered by Belgium, France and Germany. This largely rural region is surrounded by forests and nature reserves in the north, rocky gorges in the east, and the Moselle river valley in the southeast.

Luxembourg has three official languages: Luxembourgish, French and German. These are all taught in schools, and proficiency in all three is required for graduation from school. English is also taught in schools and approximately 80% of the population speaks English. When walking through the streets of Luxembourg, you will hear countless different languages being spoken throughout this modern, vibrant country.

Luxembourg has a strong historical heritage dating back to the 10th century, and retains many folk traditions. It is characterised by historic castles and monuments, including three UNESCO World Heritage cultural sites, located in the Old City of Luxembourg. There are also many magnificent museums, including the Mudam Contemporary Art Museum. While the museum itself is incredibly modern, it is surrounded by lavish parks and fortress walls, offering a unique blend of modern and historic.

Named the European Capital of Culture twice, Luxembourg is a culturally rich nation that has produced many world-famous artists. It is a founding member of the European Union, the United Nations, NATO, OECD and Benelux, and is the seat of the Court of Justice of the EU.

Despite it being one of the smallest sovereign states in Europe, it is the second-richest country in the world, partly due to the large number of people working there. This prominent financial centre is a European hub for international investors, offering a wide range of attractive and sophisticated products and services to international clients.

Registry/Registration

With its great political, economic and social stability, as well as a robust legal environment, it is no surprise that Luxembourg continues to attract skilled and multilingual self-employed professionals from across the globe.

EU/EEA nationals and citizens of Switzerland, Liechtenstein, Iceland and Norway do not need a work permit to work in Luxembourg. However they do need to apply for a Registration Attestation at the relevant municipality if they plan on staying for more than three months.

If you are a non-EU citizen, you will need an Autorisation de Sejour Temporaire (temporary authorisation to stay) to enter the country. This must be done before you move to Luxembourg.

You will then need to apply for a full residence permit (AST) and work permit. There are a number of different residence permit categories you can apply for, including a salaried worker, an independent worker, researcher and highly-qualified worker (EU Blue Card).

Within three days of your arrival you will need to visit the Administration Communale to make a declaration of arrival. You will need to present a variety of documents, including:

  • Proof of suitable housing
  • A certified copy of your AST
  • A certified copy of your arrival declaration

Your residence permit is valid for one year but if you wish to extend it this must be done at least two months before it expires. Chesterfield can help you at every stage of the application process.

Income tax

Residents of Luxembourg are subject to personal income tax on their total income, from all sources worldwide. Non-residents of Luxembourg working in the country are subject to personal income tax on sourced income from Luxembourg only. This includes freelancers and self-employed individuals, who must pay income tax at the same rate as employed people.

Taxes are paid on a quarterly basis based on the tax due in the previously assessed year. Luxembourg self-employed contractors may claim various business expenses which reduce their tax charges.

Income tax rates in Luxembourg are split into 23 brackets depending on whether you are a self-employed sole trader or freelancer. You must also decide which of the following three business categories you fit into:

  • Commercial activities
  • Skilled craft trades
  • Specific professions

Rates range from 0% to 42%, depending on your income, with the highest bracket reserved for earnings over 200,000. In 2014, the Luxembourg Tax Authorities introduced a number of special tax exemptions for expats in an effort to attract skilled, foreign workers. These exemptions are applicable to expats for up to five years after their initial arrival. Please check with Chesterfield to determine whether you are entitled to any expat tax exemptions.

Social Security

Luxembourg’s social security system is very comprehensive, offering a large range of benefits to residents who have contributed to its social security system. Whether or not you are a resident in Luxembourg, you will still need to pay the required social security contributions of your gross salary and all earnings when working in Luxembourg.

Newly registered self-employed individuals will have their contributions calculated based on the social minimum wage for unskilled workers. Following this, self-employed individuals will have their contributions calculated on the income declared in their most recent tax return.

Self-employed individuals should receive an annual letter explaining the calculation of their contributions. Minimum monthly earnings used to calculate contributions are the legal monthly social minimum wage, which is €1,998.59. Maximum monthly earnings used to calculate contributions are €9,992.93.

Social security rates for self-employed EU/EEA nationals with a Luxembourg address vary from 24.63% to 27.49% (as of 2019).

Other social security rates as of 2019 include:

  • 8% for pension insurance
  • 3.05% for health insurance
  • 1.4% dependency insurance

Employment Rules

Luxembourg’s capital is an important financial centre with European headquarters for many international tech companies, including Amazon, eBay and Skype. This is largely due to the region’s low tax economy, and as a result, a high percentage of the workforce are working as contractors.

In order to contract in Luxembourg you must be registered in the country. There are a number of options as outlined below:

  • Be employed by an umbrella company
  • Register a new company in Luxembourg
  • Operate as self-employed in Luxembourg

As an EU country the general labour laws in Luxembourg do not differ a great deal from the rest of Europe and are generally designed to protect the employee. Typical hours are a maximum of 40 hours per week and 8 hours per day, while overtime work is permitted only in special circumstances provided for by the labour law. Employees on a full-time Luxembourg contract are entitled to 25 days of paid leave per annum. There are also 10 public holidays per calendar year.

Banks

Many expats are drawn to Luxembourg due to its strategic positioning and high quality of life. If you’re moving to Luxembourg, you should open a local bank account to avoid exorbitant currency conversion and international ATM-use fees.

Residents and non-residents of Luxembourg are free to open a bank account provided they can provide the relevant documentation, including:

  • Proof of ID
  • Proof of address
  • Proof of income
  • A recent utility bill

Banking is the country’s largest economic sector; therefore you will have no issues finding a financial service provider there. Luxembourg’s finance sector has some of the most notable instructions, including the Banque et Caisse d'Épargne de l’État, which is ranked the ninth-safest bank in the world, as well as KBL European Private Bankers, and Kulczyk Investments. The country’s largest retail banks include BNP Paribas, ING, Post and BCEE.

A number of banks offer the option of opening a bank account online, including ING and BNP Paribas. Chesterfield can help you set up a bank account in Luxembourg and determine which Luxembourg payroll or banking solutions would best suit your needs.

Corporate Structures

Chesterfield’s self-employed services and Luxembourg employed solutions are extremely thorough. We offer assistance with all registration requirements, including local accounting. We also offer company establishment and invoice structuring, as per your requirements.

We can provide total responsibility for administrating your payroll, administering all dealings with the tax and National Security Office in Luxembourg. We are fully experienced in the Luxembourg labour market, assisting many contractors and self-employed professionals working within Luxembourg’s borders.

By utilising Chesterfield’s services, you will quickly establish a presence in Luxembourg, allowing you to focus on your work and continue moving forward in the market.

Chesterfield & Contracting in Luxembourg

Luxembourg is the ultimate destination for many freelancers and self-employed professionals from across the globe. With the highest minimum wage in the world and an excellent telecommunications infrastructure, this is the destination of choice for high-income professionals seeking diverse employment opportunities.

Chesterfield offers contract management solutions in Luxembourg and umbrella services for contractors wishing to undertake Luxembourg contracting. We have an established relationship with the Tax Authority in Luxembourg, ensuring they are satisfied with your presence. This will allow you to gain optimal retention rates in the market place.