Inheritance Tax in Luxembourg
Inheritance tax in Luxembourg varies according to the family relationship between the deceased and the heir. In the direct line (children, parents) and between spouses, the rates are very favourable (0-5%). For other heirs, the rates can reach 15%.
Scale in the Direct Line (Children, Parents)
Transmissions in the direct line benefit from the most favourable rates in Luxembourg. The same scale applies between spouses and legal partners.
| Inheritance bracket | Applicable rate |
|---|---|
| Up to €10,000 | 0% |
| €10,001 - €20,000 | 1% |
| €20,001 - €30,000 | 2% |
| €30,001 - €50,000 | 3% |
| €50,001 - €75,000 | 4% |
| More than €75,000 | 5% |
Calculation Example
A child inherits €100,000 from their parent:
- €10,000 at 0% = €0
- €10,000 (10,001 - 20,000) at 1% = €100
- €10,000 (20,001 - 30,000) at 2% = €200
- €20,000 (30,001 - 50,000) at 3% = €600
- €25,000 (50,001 - 75,000) at 4% = €1,000
- €25,000 (more than 75,000) at 5% = €1,250
- Total duties = €3,150 (i.e. 3.15%)
Duties According to Family Relationship
| Family relationship | Min rate | Max rate | Allowance |
|---|---|---|---|
| Brothers and sisters | 6% | 15% | €15,000 |
| Uncles, aunts | 9% | 15% | €3,750 |
| Nephews, nieces | 9% | 15% | €3,750 |
| Great-uncles, great-aunts | 10% | 15% | €1,500 |
| First cousins | 10% | 15% | €1,500 |
| Other relatives and non-relatives | 15% | 15% | None |
Caution
For non-relatives (friend, unregistered partner, etc.), the rate is 15% with no allowance at all. This is why the life annuity can be an attractive alternative: by selling rather than bequeathing, you avoid these high duties.
Exemptions and Reductions
Main residence
Condition: Effective occupancy by the deceased and the heir, subject to conditions
Scope: Partial or total exemption possible
Family business
Condition: Transmission of a business with a retention commitment
Scope: Significant reduction of duties
Life insurance
Condition: Capital paid out under a life insurance policy
Scope: Specific tax regime, often advantageous
Agricultural/forestry assets
Condition: Agricultural or forestry operation, subject to conditions
Scope: Specific allowances
How to Reduce Inheritance Tax?
Lifetime Gift
Pass on during your lifetime with renewable allowances. The gift with usufruct significantly reduces the duties while keeping the use of the property.
→ Learn more about the giftProperty Dismemberment
Give the bare ownership while keeping the usufruct. The duties are calculated only on the bare ownership (30-70% of the value depending on age).
→ Understand dismembermentSell via Life Annuity
A radical alternative: sell your property via a life annuity. The property leaves your estate, so there is no longer any inheritance to plan for this property. You receive capital and a lifelong annuity.
→ Discover the life annuityLife Insurance
Capital transmitted via a life insurance policy often benefits from a favourable tax regime, outside the classic inheritance.
Frequently Asked Questions
What is the inheritance tax in Luxembourg?
The duties range from 0% to 15% depending on the family relationship. In the direct line and between spouses, the maximum rate is 5%. For brothers and sisters, it rises to 15%. For non-relatives, it is 15% with no allowance.
How is inheritance tax calculated?
The duties are calculated by brackets on the net share received by each heir. The allowances are applied first, then the progressive scale according to the family relationship. A notary can establish a precise calculation.
Is the main residence exempt?
There are favourable provisions for the deceased's main residence, particularly if the heir also resided there. The conditions and extent of the exemption depend on the situation. Consult a notary.
Can inheritance tax be avoided?
Legally, several strategies allow the duties to be reduced: lifetime gift with usufruct, property dismemberment, life insurance, or sale via life annuity to transform property wealth into income.
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