Luxembourg's self-employed pay income tax at ordinary progressive rates, but also a consolidated social contribution of about 25.15%, levied on a minimum monthly base of €2,771.33. Liberal professions escape municipal business tax; commercial activities do not.
CNAP president Alain Reuter says Luxembourg’s 2026 pension changes have gained time without resolving the system’s structural imbalance. The warning comes as annual payments reach €7.36 billion and the reserve’s coverage declines.
Many employees in Luxembourg expect a 13th-month salary, but there is no statutory right to one. It is owed only when written into your contract, provided by a collective agreement (CCT), or established as a binding company custom. The practice is common in banking, insurance, and healthcare. This explainer covers when a 13th month is genuinely due, how it differs from a gratification or a discretionary bonus, how it is taxed, and what you can claim if you leave mid-year.
Lose your job in Luxembourg through no fault of your own and the State pays full unemployment benefit (indemnité de chômage complet): 80% of your prior gross salary, or 85% with a dependent child. You must register with ADEM within four weeks, apply within two weeks of registering, have worked at least 182 days in the previous 12 months, and be a resident aged 16 to 64. Benefit runs for up to 12 months and is applied for online.
Nearly half of Luxembourg's workforce commutes from France, Belgium or Germany. These frontaliers are taxed at source in tax class 1, but can opt for resident assimilation to unlock class 2 and deductions if 90% of household income is taxed in Luxembourg (50% for Belgians). A separate 34-day limit governs how many home-working days stay tax-free; social security uses yet another rule, allowing up to 49% remote work.
Luxembourg's statutory pension is a contributory first-pillar scheme run by the CNAP. The standard retirement age is 65, with early options at 57 or 60 under strict conditions. You need at least 120 months (10 years) of insurance to qualify. Contributions total 25.5% of capped pay, split equally between employee, employer and state (raised from 24% in January 2026). The pension combines a flat-rate part tied to career length and a proportional part based on lifetime earnings.
Almost everyone living or working in Luxembourg has compulsory health insurance through the Caisse nationale de santé (CNS), funded by social contributions. You are usually affiliated automatically via your employer and the CCSS, and get a card with your 13-digit matricule. You freely choose any doctor. Traditionally you pay first and the CNS reimburses most of the cost; a direct-payment reform is changing that. This guide covers affiliation, the card and cover.
Half of Luxembourg's full-time employees earn under €58,126 gross a year (STATEC). The average — €75,919 — is pulled up by high finance salaries. After ~12% social security and progressive income tax (0–42% plus a surcharge), most workers take home roughly 65–80% of their gross, depending on income and tax class.
Luxembourg's economy runs on cross-border workers - 231,519 of them, nearly half the salaried workforce. For 2026, two separate thresholds govern their telework: a 34-day-a-year tax tolerance, now identical for France, Germany and Belgium, and a separate social-security ceiling of just under 50%. Mixing them up can be expensive.
An EU revision of social-security rules will shift the cost of unemployment benefits for cross-border workers onto Luxembourg, the country where they work. With frontaliers filling about 47% of its salaried jobs, the Grand Duchy faces an estimated 200 million euros in extra annual cost. It secured a five-year phase-in, extendable to seven, but did not support the text.
Luxembourg’s National Health Fund is trying to contain healthcare spending before reserves fall far enough to force higher contribution rates, while the government says it will not accept two-tier medicine.
Luxembourg residents should keep invoices, check reimbursement rules and use CNS guidance before assuming every health cost is automatic.
Luxembourg’s 2026 pension package combines a pension adjustment, contribution changes and new incentives for people who keep working or save privately.