Luxembourg’s Tax System
Unlike other countries within Europe who charge you an unbelievable amount of money in taxes, Luxembourg's tax system is somewhat more reasonable. The national average for income tax is 20% on EUR 15,000 or less of income, and 21% for anything over that amount.
Also, unlike some other countries around the world, corporate taxes tend to work a little bit differently for companies who operate in or are based out of Luxembourg. Most companies will simply only pay for the cost of doing business in Luxembourg through income tax. However, for resident companies that have their main offices and conduct a majority of their business in Luxembourg, they must take care of their taxes through corporate taxing.
Luxembourg used to be, and to this day somewhat is a tax shelter. It provides the ability to withhold some of your taxes from the United States government or the tax authorities in any number of nations throughout the world.
In order to combat this, some recent moves have been made, and it is more difficult 
to hide money that should be taxed. Also, most companies are now subject to withholding taxes of various percentages on their books. This money is taken directly and sent to the tax authorities within the country. The amount varies based upon what type of transaction it is, and where the money is coming from.
Ordinary working people who live in Luxembourg do not have it nearly as easy as some of the companies. For example, they have to pay high tax rates, up to 46% of their income back to the central government. This is a real pain for people who want to be able to enjoy their lives. Taxes are deducted when the paychecks are distributed, so the money does not hit most people at the end of the year by surprise. However, the high amount of taxes for the simple working folk does not make Luxembourg seem like the luxurious tax haven that it is said to be.
Luxembourg is being admired as a great tax haven for those of us who want to hide our money. We might not want to pay taxes, and feel we can hide our cash in Luxembourg. While this is partially true, it is not nearly as true as some of the other places we could hide our cash. Just be honest, and if you are a company, the tax advantages of Luxembourg do make it an attractive business destination!
