Many of you ask yourself if it is better to be in tax class 2 rather than class 1. Whether you are an employee or a pensioner, here are the answers?
It can be really interesting to be tax integrated as a resident when you are a cross-border worker. But be careful, for one euro too much, you can lose a lot of money. Retirees are often the most penalized because they did not think of renouncing assimilation.
Why and how to request tax assimilation when you are a non-resident?
If you are married and non-resident of Luxembourg, you can deduct certain special expenses or extraordinary charges, or even benefit from the single-parent tax credit. You will need to file an annual tax return with Form 100.
Here are the requirements :
You must meet at least one criterion
- Your income must come from at least 90% Luxembourg.
- If you live in France, and you have income from a country other than Luxembourg, this must not exceed 13,000 euros net. The latter will then not be subject to Luxembourg tax but it will be taken into account to find the tax rate.
- If you live in Belgium and 50% of your household income fails from Luxembourgyou can benefit from assimilation to residents.
Tax assimilation can make you lose a lot of money, for 1 euro too much!
There are many pensioners in Luxembourg, who requested assimilation to residents in 2017, and who today pay far too much tax.
Let’s imagine that in 2017, you are employed in Luxembourg, and that today you are retired with an additional French income, for example, of 13,001 euros.
You will not be entitled to assimilation because you will have a foreign income greater than 13,001 euros, and you will therefore be taxed individually at the class 1 scale.
Another example :
You reside in France and you have a pension from Luxembourg of 16,000 euros from Luxembourg and a pension from France of 10,000 euros. Your spouse a pension from France of 10,000 euros.
You can request assimilation to residents, and therefore collective taxation (this is possible because your French pension is less than 13,000 euros). But beware, to calculate the overall tax rate in Luxembourg, the ACD (Direct Contributions Administration) will take into account all income (16,000 + 10,000 + 10,000). Your 16,000 euros will be taxed from this rate.
If you do not request assimilation to residents, you will be taxed on the scale of class 1, on the basis of 16,000 euros. Which will be much more advantageous for you!
NB Many taxpayers may be affected, especially those with a low or medium income from Luxembourg. If they have other income from another country greater than 13,000 euros, they can unwittingly increase their tax rate by requesting tax assimilation as residents.
When should you request tax assimilation or, on the contrary, no longer be subject to it?
If you wish to request assimilation for the current year, you can do so via form 166, where it may apply until December 31 for the following year (N+1).
On the other hand, if you wish to request individual taxation when you already have collective taxation, this must be done expressly. before March 31 of the following year (N+1).
Do you need help and want to optimize your tax return?
You don’t know if you should ask for tax assimilation to the resident or not? Want to be sure not to make a mistake?
call on a specialist for your tax return. There are many expenses you can deduct and several solutions to paying less tax.
Luxfiscalité, which has specialized in tax declarations for 20 years, can advise you and prepare your tax declaration for you. Win time and money….
Advertorial produced by Luxfiscalité – Assurances Bastian
Read: Tax return: who is affected by the March 31 deadline?
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