Individual tax residence and foreign income

Tax domicile or habitual abode

Domestic individual residence arises from a tax domicile or habitual abode in Luxembourg. A tax domicile involves a dwelling held in circumstances indicating it will be retained and used. Habitual abode means staying in circumstances showing the stay is more than temporary.

A permit or address is not conclusive

A Luxembourg residence permit does not automatically establish tax residence. The tax authority also states that a person whose centre of vital interests is abroad is generally non-resident regardless of address; cross-border facts and the applicable treaty therefore need examination.

Residents' worldwide-income scope

Resident individuals are subject to income tax on Luxembourg and foreign income. This worldwide scope is a starting point, with applicable double-tax relief considered separately.

Non-residents' Luxembourg-source income

An individual with neither Luxembourg tax domicile nor habitual abode can still be a non-resident taxpayer when receiving taxable Luxembourg-source income. Non-resident income-tax scope is domestic-source income, subject to applicable treaty limitations.

Treaty relief and progression

Treaties address double taxation through exemption or credit. For a resident, treaty-exempt foreign income generally enters the notional base used to determine the rate on remaining taxable income; the authority specifies an exception for exempt extraordinary income in that rate calculation.

Foreign tax where no treaty applies

For resident income from a non-treaty country that bears a tax corresponding to Luxembourg income tax, the Luxembourg tax attributable to that income is reduced for foreign tax assessed and paid. Relief is normally calculated separately by source country, with special conditions for foreign investment income; it is not a blanket foreign-income exemption.