Luxembourg’s impatriate regime reduces the income-tax base of certain employees recruited or seconded from abroad. Since tax year 2025, the mechanism has been a flat exemption rather than a reimbursement-based system.
The regime can materially affect payroll, but it is not an automatic benefit for every international hire. Residence history, salary, working time, recruitment route and the employer’s workforce must all satisfy the statutory conditions. Eligibility should therefore be assessed before the exemption enters the payslip.
The 50% income-tax exemption
Article 115, number 13b of the Income Tax Law in force on 1 January 2026 exempts 50% of eligible gross annual remuneration. The remuneration base is capped at EUR 400,000, which limits the exempt amount to EUR 200,000 for a full tax year.
Benefits in kind are excluded from the base. Cash benefits that receive a full or partial exemption under the provisions listed in Article 115, number 13b are also excluded at their full amount. Remuneration above the EUR 400,000 cap follows the ordinary income-tax rules.
This is an income-tax exemption. It does not itself create an exemption from social security. The ordinary CCSS rules for remuneration remain relevant to the contribution base and ceilings.
The two entry routes
The regime covers two types of inbound employee. The first is an employee who normally worked abroad and is seconded from a foreign company to a Luxembourg company in the same international group. The second is an employee recruited abroad by a Luxembourg business, or by a business established in another EEA State, to work in the Luxembourg business.
Temporary-agency work and employee-leasing arrangements are excluded. The distinction between direct recruitment and secondment also matters because each route carries additional conditions.
A direct recruit must have in-depth specialisation in the relevant sector. A secondee must have at least 5 years of group seniority or 5 years of specialised experience in the sector. The employment relationship with the sending entity must continue, a right of return must exist and the two companies must have a secondment agreement.
The common eligibility conditions
The Law of 20 December 2024 made the following conditions cumulative from tax year 2025.
| Condition | Required position |
|---|---|
| Luxembourg status | Tax domicile or habitual residence in Luxembourg |
| Previous 5 tax years | No Luxembourg tax domicile, no home within 150 km of the border and no Luxembourg tax on professional income |
| Working time | At least 75% devoted to the qualifying activity |
| Fixed annual gross remuneration | At least EUR 75,000 before cash benefits and benefits in kind |
| Replacement | No replacement of one or more employees who are not impatriates |
The five-year lookback contains three separate tests. Meeting only the residence test is not enough if the employee lived within 150 kilometres of the border or was taxed in Luxembourg on professional income during that period.
The employer workforce limit
Eligible impatriates may not exceed 30% of the total workforce of the Luxembourg business. Part-time employees count in proportion to their working time.
The workforce limit does not apply to a business that has existed for less than 10 years on 1 January of the current calendar year. The other conditions continue to apply to the employee and the employment arrangement.
This test can change during the life of the regime. Recruitment, departures and changes in working time can alter the ratio even when the employee’s salary and role remain unchanged.
The duration of the regime
The exemption starts only once the conditions are met. It can continue for the duration of the assignment, at the latest until the end of the eighth tax year following the year in which employment began in Luxembourg.
The conditions remain active throughout that period. The exemption can end earlier if fixed remuneration falls below the threshold, the qualifying activity drops below 75% of working time or another condition connected with the employee, the role or the employer is no longer satisfied.
An annual review should therefore use current payroll and employment facts rather than relying only on the assessment made when the employee arrived.
Payroll treatment
Where the employer operates Luxembourg wage withholding, the exemption is reflected in payroll. The eligible cash remuneration must be separated from benefits in kind and from cash benefits excluded by the statute. The annual cap also needs to be monitored when remuneration varies during the year.
Employee social contributions linked to the exempt portion are not deductible in the wage-tax calculation. The payroll setup should keep the income-tax and social-security treatments distinct.
The regime sits alongside the ordinary Luxembourg payroll calendar. A change in salary, working time or employment route may require the exemption to be reassessed before the next payroll is finalised.
The employer’s annual reporting
The employer must send the competent tax office a nominative list of beneficiaries by 31 January for the previous tax year. The deadline appears in Article 115, number 13b and in the tax administration’s fiscal calendar.
The reporting cycle provides a natural point to verify the residence history, fixed remuneration, working-time allocation, recruitment or secondment route and workforce ratio. It does not replace the need to stop the exemption during the year if a condition has already ceased to be met.
The transition from the former regime
Employees who benefited from the former cost-based regime through tax year 2024 may remain under it while its conditions continue to be satisfied. They can elect the flat 50% regime through the employer’s annual communication to the tax administration.
The election is irrevocable from the tax year for which it is made. Employees entering service from 2025 onwards fall only within the new framework.
During the transition, one payroll can therefore contain employees governed by different versions of the impatriate rules. The applicable version must be identified before the exempt amount is calculated.
Conclusion
The impatriate regime provides a 50% income-tax exemption within an annual cap, but only when all employee and employer conditions are met. The recruitment route, prior residence, salary, working time and workforce ratio determine eligibility. Payroll treatment and the 31 January reporting duty then keep the position current each year.
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Frequently Asked Questions
What does the Luxembourg impatriate regime exempt?
It exempts 50% of eligible gross annual remuneration from income tax. The eligible base is capped at EUR 400,000, so the annual exempt amount cannot exceed EUR 200,000. Benefits in kind and specified cash benefits remain outside the base.
What minimum salary applies?
The employee must receive fixed annual gross remuneration of at least EUR 75,000 before cash benefits and benefits in kind are added. The threshold is one of several cumulative conditions.
How long can the exemption apply?
It can continue until the end of the eighth tax year following the year in which employment starts in Luxembourg. It ends earlier if a required condition is no longer met.
What must the employer report?
By 31 January, the employer must send the competent tax office a nominative list of employees who received the impatriate exemption during the previous year.
