Luxembourg inheritance tax: why most families pay nothing — and the cases where the bill is brutal

If you leave your estate to your children or to your husband, wife or registered partner, Luxembourg takes nothing. The rate on the statutory share in the direct line is zero, and the same is true for a surviving spouse. If you leave the identical estate to your sister, the rate starts at 6% and a surcharge can push the effective charge past 14%. Leave it to a friend and the starting rate is 15%, before the same surcharge lifts it above 36%.

That is the single most important thing to understand about inheritance duty here. Unlike income tax, it is not really a tax on wealth. It is a tax on the relationship between the deceased and each beneficiary, applied separately to each person's net share.

The rate depends on who inherits, not on the size of the estate

Every beneficiary is assessed individually. The estate is not taxed as a block; it is divided, and each person's net share is run through the rate that matches their degree of kinship. Two heirs taking equal amounts from the same estate can face completely different bills.

A second distinction runs through the whole system: the difference between what you inherit ab intestat — the share the law itself would have given you had there been no will — and anything above that. The excess is called the extra-legal portion, and it is almost always taxed more heavily. A will that hands one child more than the law provides does not escape duty on the extra amount.

The direct line: zero, with one opening

Children, grandchildren and other descendants pay 0% on their statutory share. Parents inheriting from a child are treated the same way. This exemption is the reason the overwhelming majority of Luxembourg estates generate no inheritance duty at all.

The opening is the extra-legal portion. Where a descendant receives more than the share the law reserves for them — the part légitime, Luxembourg's version of forced heirship — the surplus is taxed at 2.5%, and in some configurations 5%, according to the official rate schedule published by Guichet.lu. It is a modest rate, but it is the one that catches families who assume "direct line" means "never taxed".

Spouses and registered partners

• Married couples: the surviving spouse pays 0%, on the statutory share and on any excess alike. There is no ceiling and no allowance to calculate, because there is nothing to tax.
• Registered partners: the same full exemption applies, but only if the declaration of partnership was registered for at least three years before the death. A partnership of two years and eleven months does not qualify, and the partner is then treated as an unrelated person at 15%.
• The historical allowance: older guides still mention a €38,000 allowance followed by a 5% rate for a spouse without common children. That regime applies only to estates opened before 1 January 2018 and is now of purely historical interest.

The three-year rule is the single most avoidable trap in Luxembourg succession law. It is a calendar problem, not a legal one, and it is worth checking the registration date rather than assuming.

Everyone else: the rate table

Beyond the direct line and the spouse, the rates climb with the distance of the relationship. Each entry below shows the rate on the ab intestat share first, then the rate on anything beyond it:

• Brothers and sisters: 6% on the statutory share, 15% on the excess.
• Uncles and aunts, nephews and nieces: 9% on the statutory share, 15% on the excess.
• Great-uncles and great-aunts, great-nephews and great-nieces: 10% on the statutory share, 15% on the surplus.
• Any more distant relative, and anyone unrelated: 15% on everything.
• Recognised charitable and religious bodies: 4%.

The surcharge that multiplies everything

Those headline rates are only the base. Once a beneficiary's net taxable share passes €10,000, the surcharge schedule published by the registration authority increases the base rate in steps expressed as tenths. The increase starts at one tenth and rises steeply for large shares:

• Above €200,000 to €250,000: nine tenths — the base rate is multiplied by 1.90.
• Above €250,000 to €380,000: twelve tenths — multiplied by 2.20.
• Above €380,000 to €500,000: thirteen tenths — multiplied by 2.30.
• Above €500,000 to €620,000: fourteen tenths — multiplied by 2.40.
• Above €620,000 to €750,000: fifteen tenths — multiplied by 2.50.
• Above €750,000 to €870,000: sixteen tenths — multiplied by 2.60.
• Above €870,000 to €1,000,000: seventeen tenths — multiplied by 2.70.
• Above €1,000,000 to €1,250,000: eighteen tenths — multiplied by 2.80.
• Above €1,250,000 to €1,500,000: nineteen tenths — multiplied by 2.90.
• Above €1,500,000 to €1,750,000: twenty tenths — multiplied by 3.00.
• Above €1,750,000: twenty-two tenths — multiplied by 3.20.

The schedule jumps from nine tenths straight to twelve tenths. That is not a transcription error; it is how the official table reads.

A worked example: €550,000 to a sister

Take an estate where a sister inherits a net share of €550,000, all of it as her statutory entitlement:

• Her base rate as a sibling on the ab intestat share is 6%.
• Her share falls in the €500,000–€620,000 band, so the surcharge is fourteen tenths — a multiplier of 2.40.
• 6% × 2.40 = 14.4%, giving roughly €79,200 of duty.
• Had any part of that share been extra-legal, the 15% base rate would have been multiplied by the same 2.40, producing an effective 36% on that slice.

The same €550,000 passing to a child would have generated nothing at all.

Giving during your lifetime

Gifts are taxed separately, through registration duty rather than succession duty, and the rates are lower. According to Guichet.lu's guidance on making a gift:

• Direct line, without dispensation from collation: 1.8%. The gift is brought back into account when the estate is later divided.
• Direct line, with dispensation from collation: 2.4%.
• Between spouses, and between registered partners of at least three years: 4.8%.
• Between brothers and sisters: 6%.
• Between uncles or aunts and nephews or nieces, and between parents-in-law and children-in-law: 8.4%.
• Between great-uncles or great-aunts and great-nephews or great-nieces: 9.6%.
• Between more distant relatives and between unrelated people: 14.4%.

Two mechanics matter more than the percentages. Duties are halved for gifts made by marriage contract or in contemplation of marriage. And a gift must in principle be made by notarial deed on pain of nullity — although case law accepts that manual gifts and disguised gifts can be valid without one, in which case there is no registration and no duty. Gifts of Luxembourg real estate must go before a Luxembourg notary and attract a further 1% transcription duty.

The paperwork, and the clock

The estate declaration goes to the Administration de l'enregistrement, des domaines et de la TVA — the office of the deceased's last domicile, or, for a non-resident who owned property here, the office covering that property. The statutory filing deadlines run from the date of death and depend on where the death occurred:

• Death in Luxembourg: six months.
• Death elsewhere in Europe: eight months.
• Death in the Americas: twelve months.
• Death in Africa, Asia or Australia: twenty-four months.

The authority can extend a deadline on written request from a presumptive heir. Once the demand for payment arrives, the duty must be settled within six weeks. Note also that duty is levied on the whole estate of someone resident in Luxembourg at death, with exceptions for foreign real estate; a non-resident who owned Luxembourg property is instead charged a transfer duty on that property.

What to check now

Three things are worth verifying long before they matter. Confirm the registration date of a partnership if the three-year threshold is anywhere near. Check whether a will pushes any heir beyond their statutory share, because that surplus is where duty appears in otherwise exempt families. And for cross-border families, remember that the EU Succession Regulation lets a person choose the law of their nationality to govern their estate — a choice that changes which shares are statutory, and therefore which slices are taxed.

For the wider tax picture, our guides to Luxembourg's income-tax classes, filing an income-tax return and the Bëllegen Akt credit for property buyers cover the taxes that arrive while you are still alive.