EUROPE
Luxembourg
Luxembourg is not a low-tax destination for personal income, and it's more honest to state this upfront: its income tax rates are comparable to those in France. Its value lies elsewhere, in two areas where it has few European equivalents. The holding company regime, completely overhauled in 2025 for expatriate employees, exempts half of the annual gross salary, up to a certain limit, for eight years. And the wealth structuring and asset management ecosystem, the second largest fund center in the world, offers a depth of expertise and legal certainty that few jurisdictions can claim. Luxembourg is therefore better suited to structuring projects than to personal tax relief.
STRUCTURE RATHER THAN SETTLE IN
Personal residence and detention facilities are two distinct responses.
A Luxembourg project is judged on what it allows you to build, not on the tax rate applicable to your income. We examine your asset structure, your investments, your succession plans, and your financing needs, then we determine whether a personal presence is justified or if only a holding structure is relevant. These two answers are often different, and confusing them is costly.
TAX ADVANTAGES
The expatriate tax regime exempts half of the annual gross salary, up to a limit of €400,000 per year, for the year of arrival and the following eight years (Direct Tax Administration). The participation exemption regime applicable to financial holding companies exempts, under certain conditions, dividends and capital gains from the sale of shares. Capital gains realized by an individual on securities held for more than a short period and representing a non-substantial shareholding are not taxed.
IDEAL PROFILE
Senior executives recruited from abroad, finance and asset management professionals. Wealthy families and groups seeking a secure, recognized jurisdiction with an extensive treaty network. Entrepreneurs preparing for a balance sheet restructuring or a structured transfer of ownership.
RESIDENCY CONDITIONS
A citizen of the European Union may settle freely, provided they register their arrival with the local municipality. Tax residency is acquired through domicile or a continuous stay exceeding six months. The expatriate tax regime requires that the individual be recruited from abroad or seconded, not have been a Luxembourg resident or taxed in Luxembourg during a specified period prior to arrival, and have a basic annual salary threshold of €75,000 (Luxembourg Direct Tax Administration).
QUALITY OF LIFE
Safety, quality public services, free public transport, European and international schools, fluent French, and a central location in the heart of Europe with a well-connected airport. The cost of housing is very high, leading some working professionals to reside in France, Belgium, or Germany, which raises specific tax issues.
POINTS OF VIGILANCE
Luxembourg's personal taxation system is not a significant factor in itself, except within the expatriate tax regime, which requires employee status and therefore does not apply to independent contractors. Holding structures require real assets, a requirement that has become considerably stricter in recent years. Finally, residing in a neighboring country while working in Luxembourg creates a cross-border situation that warrants its own analysis.
FAQ
What does the Luxembourg impatriate regime consist of?
The scheme has been completely overhauled and significantly simplified, effective January 1, 2025. The previous mechanism, based on covering expatriation-related costs, has been replaced by a single rule: half of the gross annual salary is tax-exempt, up to a limit of €400,000 per year (Luxembourg Direct Tax Administration). The benefit applies in the year of arrival and for the following eight years. An employee arriving in 2026 will therefore benefit from it until 2034. Eligibility requires being recruited from abroad or seconded by a company within the same group, not having been a resident or taxable person in Luxembourg for a specified period prior to arrival, and receiving salary that meets a minimum threshold. The scheme applies to employees, not the self-employed.
Is Luxembourg an attractive option for an independent entrepreneur?
Rarely, if the goal is to reduce personal tax liability. Luxembourg’s income tax scale reaches high marginal rates—comparable to those you are likely familiar with—and the special tax regime for expatriates is reserved for employees recruited from abroad. An independent consultant simply relocating their business to Luxembourg would find no significant advantage over France and would face higher housing costs. The situation changes entirely, however, if the project involves a holding structure, a capital-structure transaction, an investment vehicle, or a family business transfer. In such cases, Luxembourg is hard to beat. That is why we always separate the question of your personal residence from that of your business structures: the answers to the two are not necessarily the same.
What are the benefits of a Luxembourg holding company?
A Luxembourg financial holding company benefits from a "participation exemption" regime. Subject to specific holding thresholds and duration requirements, this regime exempts dividends received from subsidiaries and capital gains realized upon the sale of such holdings from taxation. Added to this are one of Europe’s most extensive tax treaty networks, access to EU directives, recognized legal certainty, and a depth of professional expertise that facilitates complex transactions. These advantages come with increasingly strict requirements. There must be genuine economic substance: a management body that is actually present, decisions made within the country, and resources commensurate with the business activity. European anti-abuse measures and transfer pricing rules apply in full. Today, a holding company lacking substance produces the exact opposite of the intended result.
Are capital gains taxed in Luxembourg?
For an individual, the answer depends on two factors: the holding period and the size of the equity stake. Capital gains realized on securities held beyond a short period—known as the speculation period—and involving a non-substantial shareholding (as defined by regulations) are tax-exempt. Conversely, a sale occurring within this period, or involving a stake exceeding the prescribed ownership threshold, falls under a taxation regime with varying terms. These rules make Luxembourg attractive for holding diversified financial portfolios, though less so for the sale of a majority stake in an operating company—a transaction requiring specific analysis and often advance structuring. The timing of the sale thus becomes a critical factor in its own right.
What is the difference between working in Luxembourg and moving there?
This situation applies to tens of thousands of people and is governed by specific rules that should not be confused with expatriation. In principle, the France-Luxembourg tax treaty assigns the taxation of employment income to the state where the work is performed; this includes mechanisms to eliminate double taxation on the French side and a special regime for days worked outside Luxembourg—the threshold for which has changed and requires verification. You remain a French tax resident, with all the associated consequences for your other income, assets, and reporting obligations. This arrangement is therefore not a relocation; it is the status of a cross-border worker, involving a different logic and support system compared to a change of residence.
What is the actual tax cost of establishing a presence in Luxembourg?
As Luxembourg is a member of the European Union, the conditions for deferring payment of the "exit tax" are highly favorable, making it an attractive destination for executives holding significant stakes who are planning a reorganization. The France-Luxembourg tax treaty, renegotiated a few years ago, allocates taxing rights based on income category and includes tie-breaker rules for cases of dual residence. Geographical proximity calls for the same level of vigilance as applies to Switzerland or Andorra: returning to France is easy, making the "household" criterion particularly critical. French-source real estate income remains taxable in France, and the real estate wealth tax continues to apply to your French assets.
What is the effective tax rate for a Luxembourg company?
Around 25% in Luxembourg City, not 17% as is often stated. The overall tax burden combines corporate income tax, the surcharge for the employment fund, and the municipal business tax, the rate of which varies depending on the municipality where the company is based (Direct Tax Administration). For a company with taxable income exceeding €200,000 and...
The information in this FAQ is provided for informational purposes only and does not constitute tax or legal advice. Tax regulations are subject to change. Coreway Consulting recommends that each client undergo a personalized analysis during the initial consultation.