Workforce Payments Guide Luxembourg

Last updated: Dec 20, 2023

Currency
Euro (EUR)
Payroll Frequency
Monthly
Capital
Luxembourg City
Fiscal Year
1 January- 31 December
Employer Taxes
12.22% to 15.30%
Employee Costs
12.45%
Central Bank
Banque centrale du Luxembourg (BCL)
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3rd Party Payments

In Luxembourg, employers have to comply with certain tax obligations. Here are some of the key payment due dates:

  • March 10th: Payment of the first advance of the corporate income tax, or of the personal income tax.
  • June 10th, September 10th, and December 10th: additional quarterly tax payment advances.
  • Before March 15th: Lodging the monthly VAT return for the previous month.
  • Before March 25: Payment of any tax due.

Please note that the taxpayer must pay the tax due within 1 month of receiving notice of the tax assessment. If the payment is late, a penalty of 0.6% for each month after the payment date is calculated on the amount of tax due.

The annual tax return or the annual Withholding Tax (WHT) adjustment form has to be filed before December 31 of the year following that in which the income is received.

Payments Coverage

Papaya Global fully supports payments coverage in Luxembourg.

Contractor Payments

Papaya Global supports payments to contractors in Luxembourg. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. it is advised for contractors to reach out to their bank to confirm how foreign currencies are handled

Payroll Frequency

Monthly

IBAN

IBAN Example Luxembourg

LU580106843867232528

IBAN in print LU58 0106 8438 6723 2528
Country Code LU
Digit Code 58
Bank Code 010
Bank Account Number 6843867232528

KYC

In Luxembourg, companies are required to perform the following steps as part of the Know Your Customer (KYC) process:

  • Obtaining and maintaining up-to-date information concerning beneficial owners of any Luxembourg entities at their registered office.
  • Filing such information in a new, specially created, register in Luxembourg.
  • Providing information on beneficial owners to national authorities (upon simple request) and certain professional organizations and professionals of the financial sector (upon grounded request).

The notion of “beneficial owner” is defined by the Luxembourg law of the 12 of November 2004 on the fight against money laundering and terrorist financing. It refers to any individual who either holds (directly or indirectly) more than 25 percent of the company’s capital or voting rights, or exercises, by any other means, a control over the management or executive bodies of the company or over the general meeting of its shareholders.

If it can be confirmed that no natural person owns, holds or controls, directly or indirectly, at least 25 percent of the relevant entity and, therefore, no person meets the requirements to be identified as beneficial owner, the name (and details) of the senior managing official(s) should be communicated to, and filed with, the Luxembourg beneficial owners’ register.

Criminal sanctions amounting to fines ranging from EUR 1,250 to EUR 1,250,000 may be applied to entities within the scope and on the beneficial owners in case of non-compliance.

Banking Regulations

In Luxembourg, the banking laws that impact cross-border workforce payments are primarily governed by the Revised Cross Border Payment Regulation (CBPR2). Here are some key points:

  • Scope of CBPR: The revised regulation extends the scope of price equality to non-euro Member States. As of the 15 of December 2019, fees and charges should be the same for cross-border payments in euros as payments of a similar value in the national currency of that Member State.
  • Increased Transparency: Extensive cost transparency requirements for currency conversion services provided when clients initiate online credit transfers and card-based transactions.
  • Information Disclosure: Before the initiation of any card-based transaction that involves a currency conversion at either an ATM or point of sale, the service provider needs to disclose the total currency conversion charges as a percentage mark-up over the most recent euro foreign exchange rate issued by the European Central Bank.

Opening a Bank Account

To open a company bank account in Luxembourg, you will need to provide the following documents:

  • A copy of the company’s Articles of Incorporation
  • An organizational chart displaying the names of all owners, shareholders, directors, and managers of the company
  • A list of signatories of the company and a copy of the rules of engagement

For natural persons who assume the role of director, manager, or shareholders, Luxembourg banks will also require the following:

  • Identification card or passport
  • Proof of residence with proof of billing in the past three months
  • Curriculum vitae
  • Information regarding an applicant’s marital status and profession
  • List of names of beneficial owners
  • Annual accounts and/or consolidated accounts

Once you’ve submitted all the necessary documentation, your Luxembourg bank account will be opened fairly quickly and you should receive your bank card and information on your account within a few days. However, the exact time may vary depending on the bank and the completeness of the provided documents.

International Banks

Here are some of the major foreign banks that operate in Luxembourg:

  • Advanzia Bank S.A.
  • Agricultural Bank of China (Luxembourg) S.A.
  • Allfunds Bank International, S.A.
  • Andbank Luxembourg
  • Banco Bradesco Europa S.A.
  • Bank GPB International S.A.
  • Bank Julius Baer Europe S.A.
  • Bank of China (Europe) S.A
  • Bank of Communications (Luxembourg) S.A.
  • Societe Generale Luxembourg
  • BGL BNP Paribas
  • Deutsche Bank Luxembourg S.A.
  • ING Luxembourg

Major Local Banks

Here are some of the major local banks that operate in Luxembourg:

  • Banque et Caisse d’Epargne de l’Etat, Luxembourg (BCEE)
  • Societe Generale Luxembourg
  • Banque Internationale a Luxembourg (BIL)
  • ING Luxembourg
  • DZ PRIVATBANK S.A.
  • Raiffeisen
  • Spuerkeess

Local B2C Payments Tools

In Luxembourg, there are several B2C payment tools available for consumers and businesses. Here are some examples:

  • PayPal: A widely used online payment system for transactions worldwide.
  • Apple Pay: A mobile payment and digital wallet service by Apple Inc. that allows users to make payments in person, in iOS apps, and on the web.
  • Google Pay: A digital wallet platform and online payment system developed by Google to power in-app and tap-to-pay purchases on mobile devices.
  • Amazon Pay: An online payment processing service owned by Amazon. Amazon members can log into their account to use stored payment information to complete the e-commerce transaction.
  • E-Invoicing: The law of the 13th of December, 2021, amending the law of the 16th of May 2019 on electronic invoicing in public procurement and concession contracts came into force on the 18th of December 2021, in order to make the use of electronic invoicing mandatory in public procurement.

Please note that the availability of these services can vary and it’s always a good idea to check with the service provider for the most accurate information. Additionally, the transition to electronic invoicing is an important lever for transformation and profitability for all sectors and particularly for business-to-business (B2B) exchanges.

Cryptocurrency

Luxembourg does not specifically regulate cryptocurrencies.

In 2018, Luxembourg’s Financial Sector Monitoring Commission released a statement warning about the risks of investing in cryptocurrencies.

On March 1st, 2019, Luxembourg enforced a law that officially recognized tokenized securities as having the same legal status as traditional securities.

For tax purposes, cryptocurrencies are not actual currencies but are considered intangible assets.

This means cryptocurrency trading platforms are subject to the same regulations as financial service providers, subjecting cryptocurrency trading platforms to the same Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) laws.

Any company or person wishing to engage in activities such as the issuing of means of payments in the form of virtual currencies, provision of payment services using virtual currencies, and the creation of a market platform to trade virtual currencies are defined as financial activities and must receive authorization from the Ministry of Finance.

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