INHERITANCE TAXES IN LUXEMBOURG (LUXEMBOURG TAX LAW)

Luxembourg legislation is very favorable for transferring inheritance. Family wealth can be passed down from generation to generation without being substantially diminished by burdensome taxes.

Taxation on inheritances: taxable assets

• If the deceased is a resident of Luxembourg, the inheritance is taxed in Luxembourg, with the exception of real estate located abroad.
• If the deceased is not a resident of Luxembourg, the inheritance is not taxed in Luxembourg, with the exception of real estate located in Luxembourg. 

Exemptions

When an inheritance is taxable in Luxembourg, several exemptions may apply. The following are a few notable cases:

• Direct line inheritance ab intestat is exempt from inheritance tax for Luxembourg residents. An inheritance ab intestat is one in which the deceased does not have a last will and testament. The inheritance is then distributed by operation of law.
• The inheritance collected by the surviving spouse having common children with the deceased is exempt for Luxembourg residents.

Applicable tariffs

Inheritance, nonetheless, is still taxable, but at very favorable tariffs:

• In direct line inheritance apart from the ab intestat, the diposable part of the estate is taxed at  2.5%. In terms of the surplus, 2.5% for the amount for the spouse and 5% for the reportable amount. The spouse is a clause allowing the surviving spouse to withdraw, before any distrubution, a sum of money or certain goods of the total to be distributed.
• Between surviving spouses without common children: 5% after an allowance of 37,500 EUR.
• Between uncles and aunts and nephews and nieces: 6%
• Between unrelated people: 14%
• For inheritances over 10,000 EUR, the tax is increased in increments of 1/10 according to a set scale, the highest being 22/10.