How Bonuses Are Taxed in Luxembourg
In Luxembourg, bonuses and 13th month payments are treated as ordinary employment income and taxed at your marginal income tax rate. The key concept is that the bonus is stacked on top of your regular salary, meaning it is taxed at the highest rate applicable to your total income.
13th Month vs. Year-End Bonus
The 13th month is a contractual payment (usually one month's salary) paid in December. A year-end bonus may be discretionary or performance-based. Both are subject to the same tax treatment.
Social Contributions on Bonuses
Bonuses are subject to the same social contribution rates as regular salary: CNS 3.05%, pension 8%, and dependency 1.4%. These are deducted before income tax is calculated.
FAQ
Is a 13th month bonus mandatory in Luxembourg?
A 13th month salary is not legally mandatory in Luxembourg but is common in collective bargaining agreements (conventions collectives). Many employers pay it in December. Check your employment contract or applicable CCT.
How is a bonus taxed in Luxembourg?
Bonuses are added to your regular salary and taxed at your marginal income tax rate. The extra income pushes more of your salary into higher tax brackets, meaning the bonus is taxed at the highest applicable rate.
Can I reduce tax on my bonus in Luxembourg?
You can make additional voluntary pension contributions (plan d'épargne pension) or insurance premium payments before year-end to reduce taxable income. Consult a tax advisor for the maximum annual deductions.
What is the marginal tax rate in Luxembourg for 2026?
Luxembourg's marginal rates range from 0% to 40%. For a gross salary of €60,000/year, the marginal rate is 36%. Above €100,000 it's 38–40%.