14. Income from investment
What are investment income (capital income)?
Investment income refers to gains from your financial investments. They include, among others:
- Interest (term accounts, bonds, savings…)
- Dividends from shares
- Income from cryptocurrencies (gains from selling or exchanging cryptocurrencies held privately)
- Income from shares in collective investment undertakings (OPC), family wealth management companies (SPF), or SICAR
Specific examples of investment income
- Dividends, profit shares, or other products related to your holdings in:
- public limited companies (SA)
- partnership limited by shares (SCA)
- limited liability companies (SARL)
- cooperatives
- Profit shares received proportionally to your investment in a commercial, industrial, mining, or artisanal business
- Arrears and interest from bonds or similar securities, including redemption premiums
- Interest from various claims (loans, savings accounts, deposits, mortgage claims)
- Discounts on negotiable debt securities
- Special allowances or additional benefits related to the above income
- Income from early realization of dividend or interest coupons if the security is not sold at the same time
- Allowances received when selling a fixed-interest security for accrued but unpaid interest
If these incomes are included in commercial, agricultural, or professional profits, they are taxed in the corresponding category.
Interest
Interest received by a Luxembourg resident may be automatically subject to a 20% withholding tax.
Some exceptions apply: annual interest under €250 per paying agent, home savings products, and certain current accounts are exempt from this withholding.
Interest received from abroad or by a non-resident must be declared to the tax administration, with the possibility of claiming a tax credit where applicable.
Declaration
- Recipients must declare interest in their country of residence
- Non-residents considered fiscal residents of Luxembourg must also declare these interests in Luxembourg
**Important information**
The 20% withholding tax is neither refundable nor creditable against other Luxembourg taxes.
Shares
The capital gain corresponds to the profit realized when selling your shares or securities, i.e., the difference between the sale price and the purchase price. It can come from holdings in Luxembourg companies (capital companies, cooperatives, etc.) as well as companies established abroad.
**Important information**
Capital gains realized during the calendar year that are less than 500€ are not taxable and do not need to be reported in your tax return.
The table below summarizes the tax treatment applicable to realized capital gains:
| Participation in the company | Participation held for less than 6 months | Participation held for more than 6 months |
|---|---|---|
| Less than 10 % | Taxed at ordinary progressive rates (0 % to 42.80 %) | Exempt |
| More than 10 % (substantial participation) | Taxed at ordinary progressive rates (0 % to 42.80 %) | Taxed at half of the global rate (maximum 21.40 %) + allowance of 50.000€ (doubled for spouses/partners taxed jointly) |
In addition to this tax treatment, a 1.4 % contribution for long-term care insurance applies, which is directly collected by the tax administration when issuing the tax notice.
Dividends
For resident taxpayers
- Dividends received from shares in Luxembourg or foreign companies are taxable
- Luxembourg companies: 15% withholding on the gross amount
- Foreign companies: withholding according to local law or double tax treaty
Partial exemption and imputation
Partial exemption
Dividends from shares in fully taxable companies located in Luxembourg, an EU country, or a country with a double tax treaty with Luxembourg are 50% exempt from income tax. This means only half of the dividend received is added to your taxable income.
Imputation of withholding tax
If withholding has been applied by the company (15% in Luxembourg or according to foreign law), this amount can be credited against your Luxembourg income tax.
Foreign dividends partially creditable
In some cases, the foreign withholding tax cannot be fully credited. The portion not credited can be deducted as acquisition costs (expenses directly related to obtaining the income).
Rates
- Subject to ordinary progressive tax rates and the 1.4% dependency contribution
Cryptocurrencies
What is a cryptocurrency?
- Cryptocurrencies (bitcoin, etc.) are not official currencies
- They are considered intangible assets, similar to shares or bonds
- All values must be converted to euros for tax declaration
Conversion to euros
All cryptocurrency transactions must be converted to euros for tax purposes:
- Revenue: use the exchange rate on the day the funds are made available
- Expenses: use the exchange rate on the day the expense is made
Private transactions
If you buy or sell cryptocurrencies privately, the gains are considered miscellaneous income:
- Selling cryptocurrency for euros or another cryptocurrency
- Paying for goods or services with cryptocurrency
Distinction based on holding period:
- Less than 6 months: gain is considered a speculative profit and is taxable
- More than 6 months: gain is generally tax exempt
Exemption: total annual gains under 500€ are exempt from tax, even if held for less than 6 months
Mining and other activity
If mining does not meet all criteria to qualify as a commercial activity, gains may be taxed as miscellaneous income.
Wealth tax
For collective entities or businesses, the value of cryptocurrencies held is included in the calculation of wealth tax, according to asset valuation rules.
Exempt tranche and acquisition costs
Exempt tranche
- First 1.500€ per taxpayer (3.000€ for a couple) from investment income is exempt from tax
Acquisition costs
-
Deductible if related to acquiring, insuring, or maintaining income:
- interest on loans to purchase securities
- banking fees
- financial subscriptions
-
Minimum allowance if no actual costs declared: 25€ per person, 50€ per couple