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Your income has changed. Your fixed tax rate hasn't noticed yet.
Your fixed tax rate is built on last year's income. A pay rise, spouse or new mortgage can throw it off: when and how to fix it with form 166.
A fixed tax rate is a comfortable thing: one percentage, taken every month, and you stop thinking about it. The trouble is exactly that you stop thinking about it. That rate is an estimate, built on your past income. The day your situation shifts, it doesn't. And the gap always catches up with you in the end.
New to the fixed rate? Start with our guide to married couples in Luxembourg, then come back here to keep yours in shape.
Your fixed rate is frozen on last year
The rate on your tax card (fiche de retenue) is provisional. A forecast, even, in the tax office's own words. It's built on the figures known when it was set, usually last year's.
As long as nothing changes, it fits. The moment something moves, it slips. And above all: it doesn't update itself between two returns.
What knocks the rate off
The usual suspects:
- a pay rise, a promotion, a bonus that swells the year,
- a spouse who starts working, or stops,
- a second income that appears in the household, or disappears,
- foreign income that goes up or down,
- new deductions to claim, a mortgage for instance.
Either way, your rate is no longer at the right level.
Example
In March, you land a pay rise of €12,000 a year. Your fixed rate, though, stays set on last year. Every month, a little too little is withheld. Left uncorrected, the difference waits for you at the end, on your tax assessment (bulletin d'imposition), as a balance to settle.
Too little, or too much: both cost you
A rate that slips hurts both ways.
Too little withheld. You pay the difference when your tax assessment lands. An unwelcome surprise can be waiting for you.
Too much withheld. Your money isn't lost, it's reconciled at the return. But in the meantime, it sits with the tax office instead of staying in your account.
Heads up
The first time a balance lands, the bill stings: you settle the tax for the year just gone. Better to adjust the rate before it comes to that.
The tax office fixes it sometimes, but after the fact
Good news: the tax office can adjust your rate on its own. Less good news: only once it has processed your annual return, and only if the gap is deemed significant, beyond roughly €1,000 for the year or one percentage point of rate.
In other words, between two returns, a rate that has gone wrong stays wrong. To fix it sooner, it's on you.
The fix: form 166, whenever you like
To put your rate straight, one document: form 166.
- no deadline, you file it any time of year,
- attach the last three payslips of both spouses,
- send it to the RTS Non-résidents office, the withholding tax office for non-residents.
The tax office recalculates, issues a new tax card, and your employer applies the new rate from the following month.
Heads up
Form 166 doesn't claw back the months already gone. It adjusts your rate from the new tax card onward, for the months ahead. The months already withheld are reconciled at your annual return.
Form 166 sorts the payslip. Not the tax return.
Two tools, two jobs. Form 166 adjusts what leaves your pay each month. The annual tax return, form 100, settles the books across the whole year.
And a reminder that matters for assimilated cross-border workers: assimilation is re-confirmed every year on the return. No return, no assimilation, and it's back to tax class 1 by default.
taxx perk
Unsure about your rate? On taxx.lu, a quick simulation tells you in minutes whether it still matches your income. And if a 166 is in order, we'll fill it in for you for €59, assimilation conditions checked, ready to sign.
In short
Your fixed rate won't warn you it's gone stale. Keeping an eye on it is up to you. A pay rise, a change on your spouse's side, a new mortgage: all good moments to check, and to file a 166 if needed.
A rate that keeps up with your life, rather than the one you were living last year.
