Working in Luxembourg?
Doing Business in Luxembourg
Working Conditions in Luxembourg: Has Perfection Been Reached?
Luxembourg has a minimum statutory wage (salaire social minimum) which applies to all employees and assures fair payment. In fact, it’s the highest minimum wage in the world! The exact rate of this wage is determined by the employee’s age and their qualifications. Thus, an unskilled worker over the age of 18 receives 100% (1,922 EUR in January 2016) of the minimum wage, 16-17 year olds receive 75% to 80%, and skilled workers who are older than 18 receive 120%.
Other than that, working conditions strongly resemble those of other Western European countries. 40-hour weeks are the norm, with overtime being paid or compensated for. Many companies, though not all, are on flexitime, which allows their employees to arrange their working hours more or less as they see fit.
Taxation in Luxembourg: Lower Than in Its European Counterparts
In Luxembourg, each employee has to complete a tax card at the beginning of the fiscal year — residents receive this automatically in the post. Taxes are then withheld and deducted from your salary. Please remember that, as a resident in Luxembourg, you are taxed on the worldwide income which you receive throughout the tax year. It is, however, advisable to take a look at the double taxation agreements that exist between Luxembourg and other countries, maybe yours is on the list. You are considered a resident if you are fiscally domiciled in Luxembourg or if you reside in the country for more than six months within one year.
The total taxable income is determined by, all in all, eight categories of taxable income:
- employment income
- business or commercial profits
- profits gained from self-employment
- net income from pensions or annuities
- net income from investments
- net income from rented properties
- profits derived from forestry or agriculture
- other sources of net income
With the exception of income from employment, pension, some savings, and some investments, taxes for which are withheld at the source, all income must be declared in your annual tax return. With the Administration des Contributions Directes you can calculate your taxes online (in French).
Expat Tax Exemptions in Luxembourg
In an effort to attract skilled, foreign workers, the Luxembourg Tax Authorities introduced new measures in January 2014 that grant expats special tax exemptions. These include non-recurring expenses, such as those involved in moving to Luxembourg, and recurring expenses, such as those for housing, school fees, yearly home travel, and more.
The exemptions are very generous, up to 80,000 EUR for the move and up to 3,000 EUR per month for recurring expenses. Furthermore, expats can continue to take advantage of these exemptions for up to five years after their initial arrival. Just make sure you inform your employer at the beginning of each year that you are a “candidate” for the expat tax exemptions and they will pass the relevant information on to the authorities.
Social Security in Luxembourg: Based on the European System
Luxembourg has a comprehensive social security system, offering a wide choice of benefits to residents who have contributed to the nation’s social security system. These benefits do not only include public healthcare, which we have covered in our article on living in Luxembourg, but also unemployment benefits, old age, and widowers’ pensions, as well as sickness, maternity, and parental leave.
In order to make use of most of these benefits, you must have contributed to Luxembourg’s social security system for a while. For instance, in order to receive unemployment benefits, you need to have worked at least 26 weeks within the last twelve months. Your social security contributions are deducted automatically from your monthly income. For more information on social security, please contact the Ministry of Social Security or the Joint Social Security Center (both websites are in French).
Luxembourg’s Business Etiquette
Luxembourgers, like most Europeans, are quite direct in their communication style. However, tact and diplomacy are highly valued and interpreted as a sign of respect. It is important to navigate this fine line between politeness and directness when doing business in Luxembourg. Try to be open but not blunt and to say what you think without being rude. Luxembourgers like to establish a personal relationship with their business partners, making sure that the people with whom they do business are indeed trustworthy. It is important to give your business partners enough time and space to do so if you want to close a deal.
At the same time, business is supposed to be logical and based on reason. Throughout meetings, Luxembourg business people like to stick to the protocol: presentations should be accurate and concise. Try to avoid making exaggerated claims or bragging about your achievements. It is important to stick to the hard facts and prove that you are a reliable business partner.
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