Luxembourg Levies Relocation Regime

Companies considering moving employees in Europe should be aware of very favorable tax provisions that exist in Luxembourg.  The country has several provisions designed to attract highly skilled workers and incentivize their companies to move them there.

Since the introduction of circular 95/2 in 2011, amended most recently in 2014, the country has allowed substantial deductions to companies that hire qualified and specialized employees who move to Luxembourg, and excluded those costs from the income of the employees.  These employees, known as impatriates, are individuals who had been working for a company from an office outside Luxembourg who are moved there, or who become tax residents after a company operating in Luxembourg hires them, so long as the employees were not Luxembourg tax residents within the last five years, or live less than 150 kilometers from the border.

The circular includes conditions concerning the qualifications and salaries of eligible employees.  The company must have at least 20 full time employees.

So long as these conditions are met, the company is entitled to a very generous list of deductions for costs incurred in connection with moving the employee to Luxembourg.  These include moving costs, housing costs for a new residence in the country, school fees, tax equalization expenses, travel expenses in some circumstances, the cost of an annual trip home, and others.  In addition to being deductible by the employer, none of these costs is considered income to the employee.  The tax advantages are available for a five-year period following assignment to Luxembourg.

How This Impacts Mobility

Companies who move qualifying employees to Luxembourg are eligible to take advantage of favorable relocation provisions.

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