In which cases should I file my tax return in Luxembourg?
Completing your tax return is not always mandatory when you reside in Luxembourg. However, even when it is optional, completing it may well save you money.
If one of these statements concerns you, no questions asked, you must complete a tax return:
· You are married and your spouse also receives a salary
· Your gross income exceeds €100,000 per annum
· You are a border worker
· You receive other income in addition to your salary - such as rents (more than € 600 per annum) or capital income (more than €1,500 per annum)
· You receive several salaries in Luxembourg (a gross amount exceeding € 30,000 per annum).
If none of these situation applies to you, the tax return is optional. But you could probably recover some of the taxes levied by taking advantage of tax deductions. Here are some expenses that you can post on your tax return.
The interest on your loans
The interest on the mortgage of your main residence is deductible from your annual tax base up to a maximum of € 2,000 during the first 5 years of the loan, then € 1,500 per annum for the following 5 years and finally € 1,000 over the last few years. Interest on consumer credits, for example for the purchase of a car, can also be deducted, up to a maximum of € 672 per annum.
This applies both to loans made in Luxembourg and to those taken out in another European country.
The amount of your insurance and savings premiums
Supplementary health insurance, civil liability, outstanding balance insurance, death and life insurance, retirement savings... The amounts of certain insurance and savings premiums may be withdrawn from your tax base, under Articles 111 and 111bis of the Income Tax Act.
Expenses to support your family
Dependent children, childcare and cleaner expenses, alimony, financial support for a parent or child in need (not related to your tax household) can also reduce your taxes.
Expenses related to an employed activity
Travel expenses, training, clothing reserved for work may also be deducted when they exceed the flat rate of € 540 per employee already deducted at source.
These expenses - which are used to acquire your revenue - are called business expenses.
Stefanie, a 31-year-old single person living in Luxembourg, has already filed a tax return. "I mentioned my car and home insurance. I received a letter from the tax authorities informing me that the amount of my direct contributions remained unchanged. I have since understood that only civil liability and personal protection are deductible. So my insurance premiums were too low to change my tax base.
So... In which case is it really worth it?
Mortgages, pension plans, life insurance or personal loans, “all investment or pension expenses involving significant sums of money should be declared” explains Viviane Jeblick, who coordinates the advice and assistance service for employees within the OGBL, the biggest trade union in Luxembourg.
Single parent or newcomer
“Moreover, there are two situations for which it is particularly advisable to file a tax return,” adds Viviane Jeblick. The first one concerns single parents who raise their child and who can benefit from the Single Parent Tax Credit of € 750.
The second situation concerns persons who started a professional activity in Luxembourg during the tax year. In this case, the tax has been calculated on the basis of a full year and the return allows you to obtain the adjustment.
Hesitating to file a return?
“One thing is certain," continues Viviane Jeblick, "there is no tax saving without a return” so it is better to file your tax return and aim for the right surprise!
Need help? Accounting firms offer to prepare your tax return and follow it up with the tax authorities. It will cost you about € 250.