Withholding tax

Withholding tax eliminating tax liabilities on income

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A 20% withholding tax has been applied on interest earned by resident individuals and paid to the State in Luxembourg since 2006. However, under certain conditions an exemption applies to interest earned on savings deposits.


The law provides for an exemption of up to EUR 250 on taxable interest earned, per person and per bank. This exemption applies only to savings deposits, provided that the interest earned is only credited once a year.


In practice:


  • You earn interest from products affected by this law, the bank automatically applies the 20% withholding tax to the gross amount of interest
  • the taxes collected are then sent by the bank to the tax authorities as a total sum, without naming the beneficiaries of this income (banking secrecy)
  • interest payments that are credited only once per year on savings deposits and that do not exceed EUR 250 per person and per paying agent are exempt from the withholding tax
  • interest payments and exempt interest payments not exceeding EUR 250 per person and per paying agent do not have to be declared as taxable income


It should be noted that this exemption only affects savings deposits (on-demand and fixed-term savings accounts), and that it is an individual right (EUR 250 per person, per year).

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