The Power of Compound Interest
Compound interest means you earn returns on both your original investment and the returns already generated. Over long periods, this creates exponential growth — often called the "eighth wonder of the world."
Luxembourg Investment Tax Overview
For individual investors in Luxembourg: interest and dividends face a 15% withholding tax. Capital gains on long-term holdings (6+ months) are generally exempt from income tax. This makes Luxembourg relatively favorable for buy-and-hold investors compared to some neighboring countries.
FAQ
What is a realistic investment return rate for Luxembourg investors?
Global equity index funds have historically returned 7–10% per year over long periods (before inflation). Luxembourg UCITS funds offer broad access to global markets. Conservative portfolios with bonds and equities might target 4–6% nominal returns.
How is investment income taxed in Luxembourg?
Interest income and dividends are generally subject to a 15% withholding tax in Luxembourg. Capital gains on shares held for less than 6 months are taxed as ordinary income. Gains on assets held longer than 6 months are generally exempt from Luxembourg income tax for individual investors.
What are popular investment options for Luxembourg residents?
Luxembourg-domiciled UCITS funds, ETFs through brokers, the Spuerkeess investment plan, and private pension schemes (plan d'épargne pension with up to €3,200/year tax deduction) are popular options.